Photographer: Angus Mordant / Bloomberg
Photographer: Angus Mordant / Bloomberg
Oil rose with the support of a weakening dollar as investors weighed in on a deteriorating short-term demand outlook against a possible rebound as Covid-19 vaccines were rolled out.
New York futures topped $ 48 a barrel after falling 1.3% on Monday. A fall in the dollar increased the attractiveness of commodities such as oil that are priced in the currency. Crude was also helped by an improved overall market sentiment after the House backed higher stimulus controls following President Donald Trump’s signing of a $ 900 billion virus relief package.
However, the coronavirus continued to increase non-stop. Southern California will extend to blockade amid rising cases, while Germany worries about the slow pace of its the deployment of vaccines could prolong the economic damage from the pandemic. The virus is also being caused again in Asia, with Thailand tighten restrictions and the South Korean newspaper the death toll rises to a record.
The rally driven by the Crude vaccine has faltered in the past two weeks with indications that perhaps progress has been made in recovering energy demand. The OPEC + alliance is also expected to add 500,000 barrels a day of production to the market from January, while Russia’s deputy prime minister said last week that the nation would support a gradual increase in production in February.
Warren Patterson, head of commodity strategy at ING Groep NV in Singapore, will also not help “renewed concern about the virus will limit the rise in oil in the short term” and the noise in Russia favoring adding more production in February will not help either. He said price movements will continue to be driven by Covid-19 developments.
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OPEC + will meet next week to decide production levels for February, with traders looking for signs of a change in sentiment among its members. In the longer term, Iran’s plans to increase oil production could undermine the alliance’s efforts to increase production while avoiding flooding the market.
Brent’s three-month period was 15 cents a barrel in contango, a bearish market structure where nearly dated prices are cheaper than later ones. The difference was up to 27 cents of investment earlier this month, and the change reflected worsening market sentiment.