Oil pushed higher with support from a weakening dollar as investors weighed a worsening short-term demand outlook against an eventual rebound as Covid-19 vaccines are rolled out.
Futures in New York rose past $48 a barrel after falling 1.3% Monday. A dip in the dollar boosted the appeal of commodities like oil that are priced in the currency.
The coronavirus continued to surge unabated, however. Southern California is set to extend a lockdown amid a surge in cases, while Germany is concerned the slow pace of its vaccine rollout could prolong the economic damage from the pandemic. The virus is also making a comeback in Asia, with Thailand tightening restrictions and South Korea’s daily death toll rising to a record. Crude’s vaccine-driven rally has faltered in the last couple of weeks on signs it may have gotten ahead of the recovery in energy demand. The OPEC+ alliance is also set to add another 500,000 barrels a day of output to the market from January, while Russia’s deputy prime minister said last week the nation would support a further gradual increase in production in February.
“Renewed concern over the virus will limit the upside for oil in the near term”and noise around Russia supposedly favoring adding more output in February won’t help either, said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. Price moves will continue to be driven by Covid-19 developments, he said.
Prices
West Texas Intermediate for February delivery rose 0.9% to $48.06 a barrel on the New York Mercantile Exchange as of 7:49 a.m. in London
Brent for February settlement climbed 0.9% to $51.33 on the ICE Futures Europe exchange after falling 0.8% on Monday
Brent’s three-month timespread was 15 cents a barrel in contango, a bearish market structure where near-dated prices are cheaper than later-dated ones. The spread was as much as 27 cents in backwardation earlier this month, with the change reflecting the worsening market sentiment.
