Oil was propped up by a weaker dollar and stronger U.S. equities with speculation growing around the Federal Reserve reinforcing its dovish message. U.S. crude futures climbed 0.8% on Monday. Equities strengthened on the possibility that a resurgence in global coronavirus cases will push Fed Chairman Jerome Powell to signal rates will stay near zero for longer. Meanwhile, the Bloomberg Dollar Spot Index weakened for a second straight session.
Still, crude futures in New York have been ensnared in a narrow trading range around $40 a barrel since early June, with global virus cases surpassing 16 million, crimping the outlook for a swifter demand recovery. Oil parked in floating storage is 244% higher than a year ago, according to Vortexa data, and still the OPEC+ alliance is preparing to ease unprecedented production cuts in a matter of days.
The shape of the crude futures curve is also pointing to weakness: Both West Texas Intermediate and Brent’s prompt spreads are trading in contango, with Brent’s in the largest contango structure since May.