SINGAPORE (Reuters) — Oil prices extended their gains on Monday, supported by a weaker dollar and tight supplies that offset worries about the recession and the prospect of widespread Covid-19 lockdowns in China, again reducing demand for fuel.
Brent futures for September settlement rose $2.54, or 2.5%, to $103.70 a barrel at 0648 GMT, after gaining 2.1% on Friday.
US West Texas Intermediate or WTI crude futures for August delivery gained $2.31, or 2.4%, to $99.90 a barrel, after climbing 1.9% in the session former.
The U.S. dollar retreated from multi-year highs on Monday, supporting commodity prices ranging from gold to oil. A weaker dollar makes commodities denominated in dollars more affordable for holders of other currencies.
Last week, Brent and WTI posted their biggest weekly declines in about a month on fears of a recession that will hit oil demand. Mass Covid testing exercises continued in parts of China this week, raising concerns about oil demand in the world’s second-largest oil consumer.
However, oil supplies remained tight, supporting prices. As expected, President Joe Biden’s trip to Saudi Arabia did not result in any promise from OPEC’s top producer to boost oil supplies.
Biden wants Gulf oil producers to increase production to help rein in oil prices and lower inflation.
On Sunday, Amos Hochstein, a senior US State Department energy security adviser, told CBS’s Face the Nation that the trip would result in oil producers doing “some extra measures” in terms of supply, although he did not specify which country or countries would increase production.
“Although there were no immediate promises of increased oil production, the United States would have indicated an expected gradual increase in supply,” said Baden Moore, head of oil research. Commodities at the National Australian Bank, in a note.
“The gradual reduction in SPR releases from November could compensate for this additional supply, even if it is not more than about 1 million barrels per day.”
The upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies including Russia, together called OPEC+, on August 3 will be closely watched as their existing production pact expires in September.
Global markets are focusing this week on the resumption of Russian gas flows to Europe via the Nord Stream 1 gas pipeline, scheduled for maintenance on July 21. Governments, markets and businesses fear the shutdown will be extended due to the war in Ukraine.
“Brent will find support at the end of the week if Russia does not return the gas to Germany after Nord Stream 1 maintenance,” said OANDA senior analyst Jeffrey Halley.
The loss of this gas would hit Germany, the world’s fourth largest economy, hard and increase the threat of a recession.
Separately, U.S. Treasury Secretary Janet Yellen said on Saturday she had productive meetings on a Russian oil price cap proposal with a host of countries on the sidelines of a meeting of the Group’s chief financial officers. of the 20 major economies.
Yellen raised the idea of the price cap during a July 5 virtual meeting with Chinese Vice Premier Liu He, China’s Ministry of Commerce said last week.
The ministry said setting a cap on the price of Russian oil is a “very complicated issue” and the precondition for resolving the Ukrainian crisis is to promote peace talks between the parties involved.