Oil extended gains after recovering from a weak start as declines in the U.S. dollar offset concerns that global demand is under pressure.
The U.S. oil benchmark rose more than 2% to trade near $89 a barrel after earlier sinking to $85.
Risk sentiment generally firmed across markets on Monday with equity markets climbing in Europe and the American currency weakening sharply as traders bet inflation is near a peak.
A weaker greenback tends to benefit assets sold in the currency.
China’s efforts to suppress covid-19 by curbing activity has weighed on oil prices with their potential of slowing down global demand.
Nonetheless, some analysts see a host of bullish factors that could elevate prices heading into the end of the year.
The conclusion of the Biden Administration’s U.S. strategic oil releases, harsher European sanctions that start on Dec. 5 and gas-to-oil switching would support oil prices, Rebecca Babin, a senior energy trader at CIBC Private Wealth Management said during a Bloomberg MLIV event.
“Looking out for rest of 2022, we see prices moving higher with WTI in the $95-$105 range and Brent $100-$110,” she said.
Crude has sunk by almost a third since June, shedding all the gains since Russia’s invasion of Ukraine.
The reversal has come as central banks including the Federal Reserve tighten policy to quell inflation.
Still, back-to-back declines in the dollar have helped oil recover from its lows in recent days, while a spate of Chinese crude purchases has spurred some optimism that the real-world market for barrels may have bottomed.
Chinese authorities have intensified lockdowns and restrictions lately as a key Communist Party meeting looms.
Reflecting the challenges, UBS Group trimmed its December Brent crude forecast by $15 a barrel.
An outbreak at one of China’s top media schools in Beijing should be stamped out “in the shortest period of time,” local government officials said Sunday.
In the U.S. late Friday, the Treasury issued rough compliance guidelines for the proposed cap on Russian oil, focusing on the documentation needed by the private sector to adhere to the program, which is meant to kick in from December as Europe tightens sanctions on flows.
Deputy Treasury Secretary Wally Adeyemo said that Moscow would have no choice but to participate.
Iranian nuclear talks were also in focus as the U.K., France and Germany said at the weekend that they have “serious doubts” about Tehran’s commitment to a new agreement. Should a pact be agreed it could pave the way for greatly increased flows of Iranian crude to the global market.
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