Crude oil prices have climbed back above $70 in afternoon trade, amid a sharp decline in U.S. crude stockpiles, a weaker dollar and rising optimism on economic recovery, specifically narrowing in on data from China showing an uptick in crude oil purchases after a major COVID lockdown reaction by Beijing that gave markets the jitters.
The $70 point is considered crude oil’s current natural resistance level.
As of 11:34 am EST, WTI was trading at $70.51, with Brent hitting $73.37. Both WTI and Brent were up 2.8% Thursday afternoon.
Also weighing in oil prices is the jobs data coming out of the U.S. New data shows that new jobless benefits claims fell last week, with August layoffs not only at a new low, but at their lowest in nearly two and a half decades, Reuters reported.
In this case, fear of a COVID-19 resurgence that would lead to more lockdowns is giving way to general optimism for economic recovery.
The optimistic jobs data, in turn, led to a weaker dollar Thursday, lending further impetus to oil prices, with a weaker dollar rendering commodities more alluring to investors.
The dollar index shed 0.158% to reach down to 92.363, but had fallen to 92.333 earlier in the day, which is a new one-month low, Reuters reported.
In the meantime, investors are still hedging their bets as to whether increased OPEC+ production will harm the market. In their hedging, they are also considering what the full impact of Hurricane Ida will be on supply and whether these two developments will balance each other out in the short term. The short-term risk for crude oil could be a slow recovery of the downstream sector from hurricane Ida, resulting in crude inventory builds during the next few weeks as crude production recovers faster than crude processing.
Speaking to Bloomberg, Energy Aspects head of research Amrita Sen, said oil prices are expected to continue on the upswing for the rest of the year, with high natural gas prices potentially boosting demand for fuel in the winter and Hurricane Ida taking “an enormous amount” of hydrocarbons offline.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.