Oil prices rose on July 18 as the U.S. dollar softened and after President Joe Biden wrapped up his trip to Saudi Arabia, failing to secure a pledge from the Middle Eastern country to boost crude output.
Brent crude futures for September settlement rose $4.53, or about 4.5 percent, to $105.70 a barrel as of 4 p.m. New York time on July 18, after a 2.1 percent gain on July 15.
U.S. West Texas Intermediate (WTI) crude futures for August delivery gained $4.53, or about 4.7 percent, to $102.10 a barrel, after climbing 1.9 percent in the previous session.
Last week, both Brent and WTI posted their biggest weekly drops in about a month as recession fears dented market sentiment.
Yet, oil supplies remained tight and the U.S. dollar has eased off recent highs, with both factors offering support to crude prices.
The greenback weakened on July 18 after hitting multi-decade highs against a basket of currency peers last week. The DXY dollar index touched nearly 109 on July 14, before slipping to 107.45 by 4 p.m. New York time on July 18.
A weaker dollar tends to support oil prices and other dollar-denominated commodities as it makes them a more attractive buy for holders of other currencies.
Some analysts said that the July 19 oil rally is unlikely to last, with high inflation maintaining pressure on central banks to keep tightening even in the face of growing signals of an economic downturn.
“Bear market bounce,” is how Keith McCullough, CEO of investment research firm Hedgeye, described the moves in crude, in a post on Twitter.
Buoyed by a weaker greenback, other commodities rose, including wheat and copper. A key industrial input, copper is seen by many analysts as a barometer of a recession.
“Another good example of a crashing market that’s bouncing this morning,” McCullough said of the action in the price of copper, which rose over 3 percent on Monday morning after tumbling 8.2 percent last week.
Wheat futures on the Chicago exchange rose 1.6 percent on July 18, recovering from their lowest in around five months.
Relief rallies are common in bear markets, experts say.
By Tom Ozimek