Oil rises as dollar’s weakness outweighs China’s coronavirus fears

Oil prices rose on Tuesday, paring losses in the previous session, after the weakness of the dollar outweighed the breadth of Corona restrictions in China, which raised fears of slowing fuel demand in China, the second largest oil consumer in the world.

Brent crude futures for January delivery rose 73 cents, or 0.8%, to $93.54 a barrel by 04:06 GMT. The December contract expired on Monday at $94.83 a barrel, a decrease of 1%.

US West Texas Intermediate crude rose 58 cents, or 0.7%, to $87.11 a barrel.

Brent and West Texas crude closed higher in October, to record the first monthly gains since May, after the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia announced plans to cut production by two million barrels per day.

The US dollar fell on Tuesday from its highest level in a week against a basket of its major peers, with traders awaiting the message that officials of the Federal Reserve (the US central bank) will send at the monetary policy meeting Wednesday.

A weak dollar makes oil cheaper for holders of other currencies and usually reflects a greater appetite for risk from the investor.

OPEC raised its forecast for global oil demand in the medium and long term on Monday, saying that $12.1 trillion in investment is needed to meet this demand despite the shift to renewables.

Corona restrictions in China forced the temporary closure of the Disney resort in Shanghai on Monday, while production of Apple’s iPhone phones at a large facility in China may drop by 30% in November.

Strict epidemic restrictions reduced factory activity in China in October and reduced imports from Japan and South Korea.

US oil production jumped to nearly 12 million barrels per day in August, the highest level since the start of the Corona pandemic, causing pressure on prices, even as shale oil companies announced that they do not expect production to accelerate in the coming months.

Reuters

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