Chinese recovery, dollar weakness cause crude price hike

Oil prices inclined during Asian trade on Monday, amidst China’s demand recovering and the weaker dollar that is supporting a market worried about the anticipated U.S. interest rate hike.

Brent crude futures were up 0.30 percent to be $83.03 per barrel, while West Texas Intermediate (WTI) crude futures were up 0.30 percent, to be $75.91 per barrel.

The market sentiment has been in a fragile state, as growing worries about a further monetary tightening by the Fed has been aggravated with high crude oil inventories in the US, ANZ Bank analysts said in a note on Monday.

“The U.S. dollar should pull back as traders give up on a re-acceleration of Fed hikes; this, in turn, clears a path for more robust Chinese fundamentals to dominate commodity trading,” said Stephen Innes, managing partner of SPI Asset Management.

Saudi Arabia and Iran have agreed to restore diplomatic relations in a China-brokered deal, giving hope for a revival of a nuclear deal and allow exports of Iranian crude.

“If you considered China opening up and a pick up in jet fuels and very limited spare capacity, we are talking 2 million barrels, so as I said we are cautiously optimistic in the short to midterm and the market will remain tightly balanced,” said Aramco CEO, Amin Nasser on Sunday.

U.S. energy firms have cut the number of oil and natural gas rigs operating  for a fourth week in a row for the first time since July 2020 this week, energy services firm Baker Hughes Co said on Friday.

The Silicon Valley Bank and Signature Bank crisis led to U.S. asset selloff later last week, which put more pressure on the dollar.