Oil rose to trade near $43 a barrel in New York Stock Exchange (NYSE) with support from a weaker dollar, while US crude stockpiles are expected to fall further, Bloomberg reported on Tuesday.
Oil futures added 1.2% after the US currency extended losses to the lowest level since May 2018, making commodities priced in the dollar more appealing. Crude inventories fell by 2 million barrels last week for a sixth weekly draw, according to a Bloomberg survey, which would be the longest run of declines this year. Meanwhile, AstraZeneca Plc has started a large-scale human trial of its coronavirus vaccine in the US as many major economies struggle to contain the outbreak that has hit oil and fuel demand.
Oil capped a fourth monthly gain in August but has struggled to make a convincing push above $43 a barrel as rising coronavirus infections raised concerns about sustained demand. However, the biggest producer in the United Arab Emirates signaled it may slash output in October to meet the country’s target under a global production-cuts deal, helping to ease a global glut.
“The market is playing a wait-and-see approach,” said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. “With some indicators showing that demand recovery is waning and supply is picking up, prices may move in a downward trend in the next couple of months.”
On Tuesday, the dollar depreciated against a basket of currencies by 0.3%, against the euro by 0.45%. Changes in Fed policy reinforce expectations of negative US rates, which is negative for the dollar, Reuters cites Louis Crous, Chief Investment Officer at BetaShares, adding “That's good for commodities."
At the same time, uncertainty remains in the markets around the situation with the coronavirus. The pandemic had a negative impact on the global economy, especially in the second quarter, hitting also the oil demand. Traders fear a second wave of the pandemic. According to the latest WHO data, about 24.5 million cases of infection have been confirmed in the world and almost 833 thousand people have passed away because of the disease.