London: Oil prices rose a dollar to above $77 a barrel on Monday, regaining most of last week’s 1.4% losses as the dollar drifted lower
US crude futures for December delivery rose $1.18 to $77.53 a barrel by 2:39pm, London Brent crude gained $1.09 to $77.40.
The US dollar fell slightly by 0.45% on Monday against a basket of currencies, as it heads into a week likely to see increased debate over currencies during US President Barack Obama’s visit to China.
“As a result, we do not see traders taking aggressive positions in either direction on the dollar this week, possibly waiting to see what happens at the culmination of the president’s visit,” MF Global commodity analyst Edward Meir said.
A weaker dollar typically supports commodities because the dollar-priced contracts become cheaper for buyers using other currencies.
Underlining views that global economic imbalances are reflected by the weakening dollar, the head of the International Monetary Fund said a stronger Chinese yuan was part of the reforms Beijing needed to implement to increase domestic consumption.
The weaker dollar helped push gold prices to a fresh record high on Monday, while US wheat, corn and soybean futures also advanced more than 1%.
There was little impact from comments by Opec’s president, Jose Botelho de Vasconcelos, who said the market was still oversupplied, adding that he was satisfied with current oil prices and compliance, which he put at about 65%.
Hopes of a revival in energy demand from Japan supported prices.
Japan’s economy grew at the fastest pace in more than two years in the third quarter, as stimulus measures lifted consumer spending and capital spending bottomed out.
But with growth in the world’s No. 2 economy largely fuelled by the continued effects of stimulus spending by governments around the world, some analysts warned the recovery may lose momentum in coming quarters due to weak domestic demand.
With most corporate results already reported, market watchers will seek the next catalyst to set direction for the dollar, stocks and commodities.
That puts this week’s round of economic data in the spotlight, including US retail sales, inflation and housing starts data.
Analysts said upside gains to oil prices could be limited, however, with US data pointing to a choppy recovery, while bulging fuel inventories also reflected sluggish energy demand.