The main US oil contract soared during trading on Monday as investors were comforted about Chinese demand as no new local Covid-19 cases were signalled in the top crude-consuming country.
At 1355GMT a barrel of WTI, the main US contract, for October delivery was five per cent higher at $65.26 dollars, while the main international contract, Brent for October delivery was up 4.7 per cent at $68.25.
Oil prices recovered from a seven-day losing streak, with gains driven by a weaker dollar despite demand concerns stoked by rising cases of the Delta coronavirus variant. Both benchmarks marked their biggest week of losses in more than nine months last week, with Brent sliding about eight per cent and WTI about nine per cent.
Many nations are responding to the rising coronavirus infection rate by introducing new travel restrictions.
“We expect to see more adjustments this week, but the market sentiment will likely remain bearish, with growing concerns over slower fuel demand worldwide,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.
China, the world’s largest oil importer, has imposed new restrictions, which is affecting shipping and global supply chains. The United States and China have also imposed restrictions on flight capacity.
While the pandemic drags on fuel demand, supply is steadily increasing. US production rose and drilling companies added rigs for the third week in a row, services company Baker Hughes said.
But a slide in the US dollar provided some support, making crude less expensive for holders of other currencies.
“A softer dollar prompted investors to rewind their positions,” said Chiyoki Chen, chief analyst at Sunward Trading.
The dollar index, which measures the currency against six peers, traded at 93.349, down slightly after hitting its highest in more than nine months on Friday at 93.734.
Investors were also adjusting their positions before the US Federal Reserve’s annual Jackson Hole symposium in Wyoming on Friday.
“While the virus remains a threat to the short-term demand outlook, despite signs of an improving situation in China, this week’s Jackson Hole summit may give the market some ideas about the timing of tapering,” said Ole Hansen, Saxo Bank’s head of commodity strategy, referring to an expected reduction in monetary stimulus for the economy. — Reuters
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