CommoditiesOil Prices Rebound 0.9% Despite Dim Demand Outlook and Surging Covid-19 Cases

An Oil Rig off the coast of the Pacific ocean. [Image/Getty]

Oil prices reversed out of a seven-day losing stretch on Monday as investors punted on crude at bargain levels, though lingering fears over how a surge in global Covid-19 cases might affect fuel demand combined with a firmer U.S. dollar to limit gains.

Brent crude futures climbed 60 cents, or 0.9%, to $65.78 a barrel by 0158 GMT, after hitting the lowest level since May 21 of $64.60 earlier in the session.

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                                                                                    Brent crude futures, technical performance chart.

U.S. West Texas Intermediate (WTI) crude futures for October rose 53 cents, or 0.9%, to $62.67 a barrel, recovering from $61.74, the lowest since May 21, touched in Asia’s early trade.

Both benchmarks marked their biggest week of losses in more than nine months last week – Brent slid about 8% and WTI fell about 9% — as markets braced for weakened fuel demand worldwide due to the surge in the pandemic.

“Oil prices took a breather (on Monday) after their steep drops last week,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

“We expect to see more adjustments this week, but the market sentiment will likely remain bearish with growing concerns over slower fuel demand worldwide,” he added.

Numerous nations worldwide are responding to the rising coronavirus infection rate, triggered by the delta variant, by adding travel restrictions to curb the spread.

China, the world’s largest crude oil importer, has imposed new restrictions with its ‘zero tolerance’ coronavirus policy, which is affecting shipping and global supply chains. The United States and China have also imposed flight-capacity restrictions.

The firmer U.S. dollar also kept investor enthusiasm in check.

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USD/JPY technical performance chart

The currency traded near its highest in more than nine months against major peers on Monday. Oil prices move inversely to the U.S. currency, making oil more expensive for foreign purchasers when the dollar rallies.

The pandemic surge prompted the U.S. Federal Reserve to move its annual Jackson Hole, Wyoming symposium to an online format to be held this Friday, raising questions about the central bank’s broader assessment of the delta variant’s economic impact as it inches toward tapering stimulus.

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