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Oil rises as dollar weakens; Economy worries cap upward by Reuters

© Reuters. FILE PHOTO: A scene shows the Chao Jing tanker at the Kozmino crude oil terminal on the shore of Nakhodka Bay near the port city of Nakhodka, Russia, on August 12, 2022. REUTERS/Tatiana Mile

by Jesslyn Lerah and Stephanie Kelly

SINGAPORE (Reuters) – Oil prices rose on Thursday amid a weakening dollar and investors emerging to buy the dips after two sessions of heavy losses, although economic concerns capped a recovery.

Futures were up 75 cents, or 1.0%, at $78.59 a barrel by 0400 GMT, while US West Texas Intermediate crude futures were up 77 cents, or 1.1%, at $73.61 a barrel.

Large declines over the past two days were driven by concerns about a possible global recession, especially as short-term economic signals appeared shaky in the United States and China, the world’s two biggest oil consumers.

“After a massive selloff since the start of the week, it looks like oil prices are trying to take advantage of some weakness in the US dollar this morning,” said Jun Rong Yep, market strategist at IG.

“A second month of contraction in the US manufacturing PMI reflects an ongoing slowdown in economic activity, which could spook buyers,” he said in the market.

Brent and WTI’s cumulative drop of more than 9% on Tuesday and Wednesday was the biggest two-day drop at the start of a year since 1991, according to data from Refinitiv Eikon.

Reflecting the near-term slump, benchmark oil contracts were back in contango in Asia trade on Thursday, meaning spot prices were lower than in subsequent delivery months.

Economic data from the United States weighed on prices as US manufacturing declined further in December. The ISM Purchasing Managers’ Index (PMI) for manufacturing fell for the second month in a row in November, from 49.0 to 48.4. The Institute for Supply Management (ISM) said this was the weakest reading since May 2020.

At the same time, a survey by the US Labor Department showed that job opportunities had decreased less than expected, raising concerns that the Federal Reserve was using the tight labor market as a reason to keep interest rates high for an extended period of time. Will do

Worries about economic disruption as COVID-19 works its way through China, the world’s biggest oil importer, have added to the pessimism around crude prices.

The Chinese government increased the export quota for refined oil products in the first batch of 2023, reflecting expectations of poor domestic demand.

Meanwhile, dollar weakness helped support oil prices, as it typically boosts demand as dollar-denominated commodities become cheaper for holders of other currencies.

Source

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