Oil Prices Edge Upward
(Bloomberg) -- Oil was propped up by the combination of 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, erasing earlier losses. Equities pushed higher 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.
“You’re going to have the Federal Reserve that’s going to be accommodative, you’ve got Congress going to pass another relief bill, and that should keep us fairly well supported,” said Phil Flynn, senior market analyst at Price Futures Group Inc. “The stock market’s showing a little more strength,” helping to further boost sentiment.
In the U.S., there are some signs of the pandemic weakening: Arizona’s cases are slowing and Florida reported the smallest increase in cases in nearly three weeks, though reported numbers tend to be lower on Mondays due to weekend staffing at labs.
Still, crude futures in New York have been ensnared in a narrow trading range around $40 a barrel since early June. 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 oil futures curve is also pointing to weakness: Brent’s prompt spread is trading in its largest contango structure since May.
- West Texas Intermediate for September delivery rose 31 cents to settle at $41.60 a barrel in New York
- Brent for September settlement rose 20 cents to $43.54 a barrel
- The global benchmark’s prompt spread was 48 cents in contango
The Bloomberg Dollar Spot Index was down as much as 1.1% on Monday.
Senate Majority Leader Mitch McConnell and other top Republicans are set to release a series of bills that represent the $1 trillion GOP plan for a new virus stimulus package after the Senate convenes Monday at 4:30 p.m. in Washington.
Other oil-market news
- Reliance Industries Ltd. toppled Exxon Mobil Corp. to become the world’s second-largest energy company after Saudi Aramco as investors piled into the conglomerate lured by the Indian firm’s digital and retail forays.
- Total SE is exiting the U.K. refining business with the sale of its Lindsey refinery to Prax Group as the French oil major slashes costs and divests assets to weather the slump in demand caused by the coronavirus pandemic.
- Rosehill Resources Inc. filed for bankruptcy protection after a plunge in oil prices forced the Permian shale explorer to seek a restructuring of its debt.
--With assistance from James Thornhill and Alex Longley.
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