Perth: Oil rose more than $1 to above $43 a barrel on Monday, buoyed by a weaker US dollar and tough talk from top Opec producers of compliance with their record output cut, while US data showed speculators betting on a bounce.
US light crude for delivery in February, when cuts in Opec production were expected to take hold, rose 93 cents to $43.30 a barrel by 6:55am. The January crude contract expired on Friday, when it traded at a deep discount to February as key mid-continent storage tanks filled to near overflowing.
London Brent crude gained 69 cents to $44.69.
“The US dollar has weakened after the sharp rebound on Friday. That’s one of factors pushing oil higher,” said Toby Hassall, chief analyst at Commodities Warrants Australia.
A surge in net speculative investment in the crude complex to its highest since mid-May, as of 16 December data, also fed the emerging view that markets may have hit bottom for now, although fears over the outlook for demand tempered hope for a bounce.
Speculators increased their net length to 64,120 lots during the week to last Tuesday, a surge from 10,807 the previous week, Commodity Futures Trading Commission data showed.
“I suspect in the last couple of weeks we probably saw a bottom in the oil market and that is also attracting some buying interest,” said Hassall.
The US dollar fell against the euro on Monday, giving up some of its gains made after the US government offered a lifeline to US carmakers, as investors remained concerned over the deepening economic recession.
Oil prices have fallen more than $100 from their peak of above $147 in July as a global economic crisis slashes global oil demand.
Pledges by Opec last week to cut output by 2.2 million barrels per day (bpd) - its deepest ever supply cut - have failed to stem the slide in January oil prices, which expired on Friday at $33.87 a barrel, the lowest since February 2004.
Opec kingpin Saudi Arabia moved to scotch doubts on Sunday on the cartel’s pledge to cut oil production to stabilise world oil markets, while Kuwait’s oil minister also said separately on Sunday that he was confident that Opec members will comply with latest output cuts decided by the group.
In Opec member Nigeria, where production has been hindered for years by repeated militant attacks, gunmen in speedboats attacked three oil services ships and kidnapped at least two Russians in separate incidents in the Niger Delta, sources said on Saturday.