Oil Pushes Higher Aided by Dollar Amid Grim Short-Term Outlook – Bloomberg

Oil pushed higher with support from a weakening dollar as investors weighed a worsening short-term demand outlook against an eventual rebound as Covid-19 vaccines are rolled out. Futures in New York rose past $48 a barrel, though liquidity was thin in the period between Christmas and New Year. A dip in the dollar boosted the appeal of commodities such as oil that are priced in the currency. Crude was also aided by broader market strength, with equities heading for a record following U.S. President Donald Trump’s signing of a $900 billion virus-relief package.

The coronavirus continues to surge unabated, however. Southern California is set to extend a lockdown, while Germany is concerned the slow pace of its vaccine rollout could prolong the economic damage from the pandemic. The virus is also making a comeback in Asia, with Thailand tightening restrictions and South Korea’s daily death toll rising to a record.

Vaccine-driven surge has run out of steam in last couple of weeks

Crude’s vaccine-driven rally has faltered in the past couple of weeks on signs it may have gotten ahead of the recovery in energy demand. The OPEC+ alliance is also set to add another 500,000 barrels a day of output to the market from January, while Russia’s deputy prime minister has said the nation would support a further gradual increase in production in February.

Oil prices are “looking several months ahead instead of at the short-term challenges,” said Ole Hansen, head of commodities strategy at Saxo Bank. Stimulus measures are “supporting the reflation trade, which is also part of the growing appetite for commodities.”

PRICES
West Texas Intermediate for February delivery rose 1.4% to $48.29 a barrel as of 10:04 a.m. London time Brent for February settlement also climbed 1.4% to trade at $51.58

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