Oil up as bulls seek higher ground amid dollar dip, Fed-related flux
2023.04.24 14:50
© Reuters
Investing.com — Crude prices rose for a second session in a row on Monday as bulls in the space leveraged on the weakness in the dollar, which dipped again after last week’s positive close, the first in five weeks for the U.S. currency.
New York-traded West Texas Intermediate, or , was up $1.05, or 1.4%, to $78.92 a barrel by 13:31 ET (17:31 GMT). WTI was up 0.6% on Friday but ended the week down 5.6%, snapping a four-week rally heightened by this month’s production maneuver by OPEC+ that had brought a net gain of 24%.
London-traded , the global benchmark for crude, was up $1.16, or 1.4%, to $82.62. Brent finished up 0.7% on Friday while ending the week down 5.4%.
“It’s some weakness in the dollar but I would put it down to market flux ahead of the Fed hike expected next week,” John Kilduff, partner at New York energy hedge fund Again Capital, said, referring to the expected at the Fed’s rate decision on May 3.
If the Fed does as the market thinks it would, then the central bank would have implemented monetary tightening for a tenth time in 13 months, bringing rates to a peak of 5.25% versus the pandemic-era rate of just 0.25%.
The dollar rebounded from last week from one-year lows ahead of the May 3rd Fed rate decision. A higher weighs on overseas demand for commodities priced in the currency. Higher sap the appeal of risk-heavy assets, while also limiting flows of foreign capital.
Also aiding oil bulls on Monday was optimism that holiday travel in China would boost fuel demand in the world’s largest oil importer.
China’s bumpy economic recovery after the COVID-19 pandemic has clouded the oil demand outlook, though Chinese customs data on Friday showed record volumes of imports in March, Reuters reported.
Bookings in China for trips abroad during the upcoming May Day holiday point to a continued recovery in travel to Asian countries, but the numbers remain far off pre-COVID levels with long-haul airfares soaring and not enough flights available.
“There’s a lot of optimism around Chinese holidays as it relates to jet fuel demand, the first genuine numbers on Chinese demand construction,” said Bob Yawger, director of energy futures at Mizuho, in comments carried by Reuters.
