Oil prices jumped 3% early on Monday, snapping the longest losing streak since 2019 of seven consecutive settlements in the red, as investor risk appetite increased and the U.S. dollar softened.
As of 8:04 a.m. EDT on Monday, WTI Crude had jumped by 3.19% at $64.10 and the prompt price of Brent Crude traded up 3.24% at $67.27.
A weaker U.S. dollar and China bringing local COVID cases back to zero after a month of drastic restrictions on movement encouraged crude oil buying in the market, which had settled lower on Friday for the seventh day in a row-the longest losing streak since 2019.
Last week, the strengthening U.S. dollar, the surging Delta variant cases in major economies, and the Fed's signal that it would start tapering stimulus sparked a sell-off on the markets, with risk assets and commodities hammered the worst.
On Friday, Dallas Federal Reserve President Rob Kaplan said he might rethink his call on the Fed to start tapering the asset-buying program if the Delta variant slows economic growth.
China, the world's top crude oil importer, reported zero local cases of COVID-19 after weeks of localized lockdowns and suspension of public transport services and flights, which took a toll on fuel demand.
"Crude futures resumed trading for a fresh week with an upward bounce as some buying on the dips crept into the broader financial markets after last week's hammering of risk assets," Vanda Insights said in a note early on Monday.
This week, the markets will be watching the Jackson Hole annual symposium of the Fed, which will be held virtually, for signs when the Federal Reserve might begin tapering the stimulus asset purchase program.
"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," Saxo Bank said in a market commentary on Monday.
By Tsvetana Paraskova for Oilprice.com
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Comments
My reasoning was based on the fact that while the concerns about a resurgence of COVID cases particularly in Asia are a fact, it is equally a fact that the fundamentals of the global oil markets are robust underpinned by a global economy rising this year at 6.3%, China’s economy also rising at 8.3% and the United States’ economy recovering fast.
The parallels are there for everybody to see. In May 2020 even at the height of the pandemic, China managed to control the pandemic with draconian measures and exited the lockdown thus leading both the global economy and global oil demand out of the doldrums and the rest is history. This is happening once more with China bringing local COVID cases back to zero.
Contributors to the oilprice.com should learn not to jump the gun too hastily because that is the sure way to wrong projections and conclusions.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Most of the World doesn't even have oil save for what they can export to the USA for refining for a couple hundred US Dollars.