Oil in New York extended gains to erase a weekly loss, garnering support from a recovery in equities and a softer dollar.
West Texas Intermediate climbed as much as 2.3%, reversing some of Thursday’s slump as a weakening dollar makes commodities priced in the currency more attractive. Prices are little changed on the week after falling on concern over the spread of Covid-19 in Asia.
Oil has rallied this year with the rollout of Covid vaccines, but the gains have stalled since early March amid virus flare-ups and concerns over inflation. There signs the gains could resume, with U.S. travel expected to pick up and Brent’s nearest contract rising to as high as 27 cents over the next month. A growth in that structure, known as backwardation, is suggesting the market is expecting tighter supplies and reverses an earlier slump.
“The dollar has been steadily declining, which is bullish for commodities,” said John Kilduff, a partner at Again Capital LLC. Adding support, easing virus restrictions in the U.S. “feed into the idea that it’s going to be a busy travel season.”
The International Energy Agency said this week that the global glut that built up last year has cleared. Federal Reserve policy makers also signaled continued backing for the U.S. economy.
“So far, the demand recovery is still fairly uneven,” said Bob Ryan, commodity & energy strategist at BCA Research. “Covid has not yet been contained. But next year, prices more than likely drift up toward $70 a barrel, because of the synchronization of the global recovery from the pandemic.”
- WTI for June delivery rose $1.19 to $65.01 a barrel as of 10:10 a.m. in New York
- Prices are up 0.2% this week
- Brent for July settlement gained $1.31 to $68.36 a barrel
- Prices are 0.1% higher for the week
The recovery in the U.S. has been solid, boding well for energy consumption in the world’s largest economy. President Joe Biden’s administration announced Thursday that fully vaccinated Americans can ditch masks in most settings.
But India’s sustained struggle with the latest outbreak is continuing to weigh on markets. Some local ports have declared force majeure due to staffing shortages. Elsewhere in the region, Singapore will reimpose curbs, Japan plans to extend restrictions and China saw its first coronavirus infections in about a month.