Oil rises on weaker dollar, but virus woes and U.S.-China tensions weigh

Energy

An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.

David McNew | Getty Images

Oil edged up on Friday as the dollar fell to an almost two-year low, although demand concerns stemming from rising coronavirus cases and U.S.-China tensions kept a lid on prices.

The dollar slid to 22-month lows against a basket of currencies. A weaker dollar usually spurs buying of commodities priced in the greenback, like oil, because they become cheaper for holders of other currencies.  

Brent crude rose 15 cents, or 0.4%, to $43.46 a barrel by 0137 GMT, and U.S. West Texas Intermediate (WTI) crude  rose by 12 cents, or 0.3%, to $41.19.

“Crude prices are attempting to stabilize as expectations still remain high that Congress will be successful in delivering another pandemic relief package” for the United States, said Edward Moya, senior market analyst at OANDA in New York. 

“Yesterday’s U.S. economic data showed that the economic recovery is struggling and pretty much guarantees more federal aid is coming.” 

The number of Americans filing for unemployment benefits unexpectedly rose to 1.416 million last week for the first time in nearly four months, suggesting U.S. economic recovery is stalling amid a resurgence in COVID-19 cases.

The United States on Thursday recorded over 1,000 deaths from COVID-19, marking the third straight day the nation passed that grim milestone as the pandemic escalates in its southern and western states. Globally, more than 15 million have been infected and over 620,000 have died.

While the rise in infections has fanned fears of renewed government lockdowns, worries that oil demand could be hit have been exacerbated by tensions between the United States and China - the world’s top two oil consumers.    

China said the U.S. move to close its Houston consulate this week had “severely harmed” relations and warned it “must” retaliate, without detailing what it would do.

Washington on Tuesday gave China 72 hours to close the consulate, which it said was “to protect American intellectual property and Americans’ private information”, in a dramatic escalation of tension between the world’s two biggest economies.

Barclays Commodities Research has said oil prices could see a correction in the near term if a recovery in fuel demand slows further, especially in the United States.

The bank lowered its oil market surplus forecast for 2020 to an average 2.5 million barrels-per-day (bpd), from 3.5 million bpd previously.

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