Oil pushes higher through dollar amid short-term short-term outlook

Photographer: Angus Mordant / Bloomberg

Oil pushed higher with support from a weakening dollar as investors weighed on a weakening short-term demand outlook against an eventual rebound as Covid-19 vaccines were rolled out.

The New York futures contract rose more than $ 48 a barrel after falling 1.3% on Monday. A fall in the dollar has strengthened the attractiveness of commodities such as oil priced in the currency. Crude oil was also helped by an improvement in broad market sentiment after the House backed higher stimulus checks following President Donald Trump’s signing of a $ 900 billion virus relief package.

However, the coronavirus continued unabated. Southern California is planning a amid an increase in cases, while Germany is concerned about its slow pace the deployment of vaccines could prolong the economic damage caused by the pandemic. The virus is also making a comeback in Asia, with Thailand stricter restrictions and South Korea’s daily death toll rises to a record.

Crude’s vaccine – driven rallies have faltered over the past few weeks with signs that it may have come before the recovery in energy demand. The OPEC + alliance will also add another 500,000 barrels a day to the market from January, while the Russian deputy prime minister said last week that the nation will support a further gradual increase in production in February.

“The renewed concern about the virus will limit the upward level of oil in the short term” and noise around Russia, which apparently wants to produce more in February, will also not help, says Warren Patterson, head of commodity strategy at ING Group NV in Singapore . Price movements will be driven by Covid-19 developments, he said.

Prices
West Texas Intermediate for delivery in February rose 0.9% to $ 48.06 a barrel on the New York Mercantile Exchange from 07:49 in London Brent for settlement in February climbed 0.9% to $ 51.33 on the ICE Futures Europe exchange after falling 0.8% on Monday

OPEC + will meet next week to decide on production levels for February, and traders will be looking for indications of changing 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 not flooding the market.

Brent’s three-month time spread was 15 cents a barrel in contango, a clumsy market structure where prices are almost cheaper than later. The spread was down 27 cents earlier this month, with the change reflecting deteriorating market sentiment.