Crude oil witnessed a 3 per cent jump yesterday recovering 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.
Brent crude climbed $2.08, or 3 per cent, to $67.26 a barrel after touching its lowest since May 21 at $64.60, while the US West Texas Intermediate (WTI) crude for October delivery rose $1.90, or 3 per cent, to $64.04.
Both benchmarks marked their biggest week of losses in more than nine months last week, with Brent sliding about 8 per cent and WTI about 9 per cent.
Countries are presently 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. U.S. production rose and drilling companies added rigs for the third week in a row, services company Baker Hughes said.
But a slide in the U.S. 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.
Investors were also adjusting their positions before the U.S. 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.