US restocking on crude bolstered oil prices, US dollar up on strong economic readings
ALBAWABA – Oil prices rose on Monday as the US dollar also started the day on the front foot after strong economic data from the United States (US) came in on Friday, ahead of the Federal Reserve’s (Fed) meeting on Tuesday.
Last week’s US inflation and jobs data supported expectations that the Fed will be able to deliver a soft landing for the US economy and is unlikely to hike rates in its next meeting tomorrow.
The US dollar strengthened against most major currencies as the Japanese Yen slipped and deflationary pressure in China pushed the Yuan down, while Treasury 10-year yields rose to 4.25 percent.
Data on Friday showed US jobs growth accelerated in November, according to Reuters, while the unemployment rate fell to 3.7 percent and inflation slowed.
Oil prices, US dollar both up on economic data and anticipation of Fed decision - Shutterstock
News bolstered the prospects of a soft landing for the US economy, boosting 10-year treasury yields and the US dollar in the process.
The Pound Sterling dipped 0.04 percent to $1.25425 and was huddled near Friday's two-week low of $1.2504, as the greenback pushed back above 145 yen and last bought 145.62 yen.
The euro rose 0.07 percent to $1.0768 but stood not too far from Friday's more than three-week low of $1.07235, while the dollar index edged 0.07 percent higher to 104.03.
Reuters reported the index had gained more than 0.7 percent last week, reversing three weeks of loss, while Bloomberg’s US dollar index spot was up 0.04 percent by 1323 Amman Time, at 104.0530.
The Australian dollar, often used as a liquid proxy for the yuan, fell 0.17% to $0.6566, while the New Zealand dollar slipped 0.1% to $0.6115.
Despite stronger US dollar, oil prices rise on US replenishing inventories
Meanwhile, oil prices rose on Monday, extending gains for a second session as US efforts to replenish strategic reserves provided some support, by taking from market-bound supply.
Nonetheless, concerns of crude oversupply and softer fuel demand growth next year persisted.
Both Brent and West Texas Intermediate (WTI) crude futures rose 0.7 percent.
Brent crude futures rose $0.56 to $76.40 a barrel by 0735 GMT, according to Reuters, while WTI crude futures were at $71.71 a barrel, up $0.48.
US dollar, oil prices up as US replenishes inventories but investors are sceptical that supply will drop as a result of OPEC+ cuts in 2024 - Shutterstock
On Friday, both contracts jumped more than 2 percent but quickly fell for the seventh straight week, their longest streak of weekly declines since 2018, on lingering oversupply concerns.
The recent price weakness drew demand from the US, which has sought up to 3 million barrels of crude for the Strategic Petroleum Reserve (SPR) for delivery in March 2024.
Notably, the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, have pledged to cut 2.2 million barrels per day (bpd) of production in the first quarter. Yet, investors remain sceptical that supply will drop. Output growth in non-OPEC countries is seen leading to an excess in supply next year.
