After again finding support near $49.50, oil futures regained ground with a slightly weaker dollar, expectations of firmer demand and wider gains in the commodity complex offering support.
Crude prices advanced in early US trading on Monday as the dollar came under some pressure, but WTI futures hit resistance close to $50.50 and fell sharply to lows below $49.60 later in New York. Prices were undermined by reports that Iran was looking to boost its production capacity to 5.0mn bpd.
The softer dollar tone has helped provide some net support to crude, especially as industrial commodities have also had a generally firmer tone and prices gradually recovered ground with a move back to the $50.0 p/b area.
Short-term traders continued to probe the limits of recent ranges in an attempt to trigger a break.
There were comments from Norway’s Oil Minister Lien that global demand for oil is rising and will probably push prices higher.
There was also an increase in underlying confidence that the overall over-supply situation may be less of a concern than expected, which helped curb potential selling pressure on crude.
During the European session, there were comments from the Algerian oil minister that OPEC would reach agreement on all aspects of September’s production deal before the late-November regular OPEC meeting in Vienna. A weaker dollar continued to provide background support and November WTI futures moved to highs around $50.40 with Brent December futures testing resistance ahead of $52.00.
Any dollar strength after the US CPI data would lessen the potential for further upside in crude.
The latest American Petroleum Institute (API) inventories data will be watched closely overnight following the reported build last week.
There is a strong probability of a sizeable draw in the Cushing data given the outage of an important feeder pipeline. The fuel inventories data will also be watched closely, especially with concerns that rising Chinese exports will have a net negative impact on the global market.
Oil Futures 4H Chart