On Monday, crude oil prices soared by more than 5% on the back of weaker US Dollar and strong global equities markets.
Brent ended the session by skyrocketing by 5.5% to USD68.75/barrel, after the session hit the lowest since May 21 at USD64.60/barrel. US WTI for October surged by 5.6% or USD3.50 to settle at USD65.64/barrel.
Last week, both benchmarks posted the biggest week of losses in more than nine months. Brent slid by roughly 8% and WTI by 9%.
Monday’s reading was supported by a drop in the US Dollar which made crude less expensive for holders of other currencies. The dollar index plunged by 0.4% after on Friday it saw its highest level in more than nine months.
The MSCI world equity index was up after having its biggest weekly fall since June last week.
However, oil supply is gradually climbing higher as according to services company Baker Hughes, US output jumped and drilling companies added rigs for the third straight week.
Going forward, Kazuhiko Saito, chief analyst at Fujitomi Securities predicted that this week, there would be more adjustment. “The market sentiment will likely remain bearish, with growing concerns over slower fuel demand worldwide,” he said.
“We anticipate that benchmark oil prices will remain, for now, stuck in a period of trendless rangebound volatility,” RBC Capital Markets analysts noted.
China has imposed new coronavirus-related restrictions, which are affecting shipping and global supply chains. Other than that, both the US and China have also imposed restrictions on flight capacity.
Other than that, the US Federal Reserve’s annual Jackson Hole symposium on Friday has driven investors to adjust their positions. Ole Hansen of Saxo Bank commented, “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.”
