Oil leaps on weaker dollar after seven days of losses

Oil prices jumped on Monday, recovering from a seven-day losing streak, with gains driven by a weaker dollar despite demand concerns stoked by rising cases of the Delta coronavirus variant.

Brent crude climbed US$3.57, or 5.5 per cent, to settle at US$68.75 a barrel after touching its lowest since May 21 at US$64.60 during the session. U.S. West Texas Intermediate (WTI) crude for October delivery rose US$3.50, or 5.6 per cent, to settle at US$65.64.

Both benchmarks marked their biggest week of losses in more than nine months last week, with Brent sliding about eight per cent and WTI about nine per cent.

Many nations are responding to the rising coronavirus infection rate by introducing new travel restrictions. “We expect to see more adjustments this week, but the market sentiment will likely remain bearish, with growing concerns over slower fuel demand worldwide,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

China, the world's largest oil importer, has imposed new restrictions, which is affecting shipping and global supply chains. The United States and China have also imposed restrictions on flight capacity.

While the pandemic drags on fuel demand, supply is steadily increasing. U.S. production rose and drilling companies added rigs for the third week in a row, services company Baker Hughes said.

But a slide in the U.S. dollar provided some support, making crude less expensive for holders of other currencies. “A softer dollar prompted investors to rewind their positions,” said Chiyoki Chen, chief analyst at Sunward Trading.

The dollar index slid. Last week it hit a nine-month high on bets that the Fed would start shifting away from its accommodative monetary policy, but that view began to change on Friday when Dallas Fed president Robert Kaplan said he might reconsider his hawkish stance if the virus harms the economy.

Now, investors are less confident Fed chairman Jerome Powell's speech at Jackson Hole, Wyo., this week will indicate a timeline for winding down the Fed's bond-buying program.

The dollar index, which measures the currency's performance against a basket of six major currencies, fell 0.516 per cent to 92.999.