Oil increases with the help of the dollar, despite the prospect of nebulous demand

Photographer: Angus Mordant / Bloomberg

Oil rose with support from the weakening dollar, with investors evaluating a worsening outlook for short-term demand against an eventual recovery with the launch of the Covid-19 vaccines.

New York futures rose to more than $ 48 a barrel, although liquidity was scarce between Christmas and New Year. A fall in the dollar has increased the appeal of commodities, such as oil, which are priced in currency. Oil was also helped by a broader market force, with the shares are headed for a record high after US President Donald Trump signed a $ 900 billion virus relief package.

The coronavirus continues to increase without decreasing, however. Southern California is set to extend a lockdown, while Germany is concerned about the slow pace of its the launch of vaccines can prolong the economic damage of the pandemic. The virus is also returning in Asia, with Thailand tightening of South Korea’s restrictions and daily rates the number of deaths reaching a record high.

The rally driven by the oil vaccine has faltered in recent weeks in signs that it may have been ahead of the recovery in energy demand. The OPEC + alliance is also expected to add another 500,000 barrels of production per day to the market starting in January, while Russia’s deputy prime minister said the country would support a further gradual increase in production in February.

Oil prices are “looking several months ahead of short-term challenges,” said Ole Hansen, head of commodity strategy at Saxo Bank. The stimulus measures are “supporting the reflective trade, which is also part of the growing appetite for commodities”.

OPEC + will meet next week to decide on production levels for February, with traders looking for indications of changing sentiment among its members. In the long run, Iranian plans to increase oil production could undermine the alliance’s efforts to increase production.