Oil rebounds on weaker dollar; economy concerns cap upside
Oil prices rise on weaker US dollar after sharp losses
Market forward the month in contango as concerns about the economy weigh
US manufacturing data, China COVID cases dampen sentiment
SINGAPORE, Jan 5 (Reuters) – Oil prices rebounded on Thursday amid a weaker dollar and as investors rushed to buy dips after two sessions of heavy losses, although economic concerns stop the recovery.
Brent crude futures were up 89 cents, or 1.1%, at $78.73 a barrel by 0740 GMT, while US West Texas Intermediate crude futures were up 87 cents, or 1.2%, at $73.71. the bucket.
Big declines in the previous two days were driven by worries about a potential global recession, especially as short-term economic signals in the world’s two largest oil consumers, the United States and China, appeared shaky.
“Coming after the strong selloff from the start of the week, it looks like oil prices are trying to exploit some weakness in the US dollar this morning for some reprieve,” said Jun Rong Yeap, market strategist at IG.
“The second month of contraction in the manufacturing of the United States PMI continues to reflect a continuous reduction in economic activities, which may leave buyers shunning” the market, he said.
The cumulative drop of Brent and WTI of more than 9% on Tuesday and Wednesday was the biggest two-day loss at the beginning of a year since 1991, according to Refinitiv Eikon data.
Reflecting near-term bearishness, benchmark oil contracts slipped back into contango in Asian trade on Thursday, meaning spot prices were lower than those for delivery months later.
Economic data from the US weighed on prices as US manufacturing contracted further in December. The ISM purchasing managers’ index (PMI) for manufacturing fell for the second consecutive month in November, to 48.4 from 49.0. It was the weakest reading since May 2020, the Institute for Supply Management (ISM) said.
At the same time, a survey by the US Department of Labor showed that jobs fell less than expected, raising concerns that the Federal Reserve will use the tight labor market as a reason to keep ir -higher interest rates for longer.
Concerns about economic disruption as COVID-19 works its way through China, the world’s largest oil importer, have added to pessimism around crude prices.
The Chinese government increased export quotas for refined petroleum products in the first batch for 2023, signaling expectations of poor domestic demand.
Meanwhile, the dollar’s weakness has helped support oil prices, as it typically boosts demand as dollar-denominated commodities become cheaper for holders of other currencies. (Reporting by Stephanie Kelly in New York and Jeslyn Lerh in Singapore; Editing by Christian Schmollinger and Bradley Perrett)