Oil prices were little changed at $71 a barrel today, paring earlier losses as rising Asian stocks bolstered sentiment over an economic recovery while the dollar dipped, lending support to the commodities complex.
Slight losses in the US dollar after its jump of more than 1 per cent jump on Friday buttressed oil prices, which like other commodities are increasingly played against the greenback. A 1.3 per cent rise in Japan's Nikkei, tracking Friday's Wall Street gains, helped.
US crude rose 11 cents to $71.04 a barrel by 0343 GMT, retracing earlier losses. London Brent crude rose 15 cents to $73.74 a barrel.
Prices rose more than 2 per cent last week amid generally upbeat earnings and economic indicators that raised hope of higher fuel demand, touching a five-week high on Friday. But they closed the day down more than $1, the biggest decline since July 29th, after the dollar's unexpected surge on positive jobs data.
US employers cut 247,000 jobs in July, far fewer than expected and the least in any month since last August, according to a government report.
"The US payrolls data would have been supportive for crude, but investors are now focusing on the strength in the US dollar," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
"While we'll probably see another bunch of positive Chinese data over the next few days, the story remains that oil supplies are quite ample at the moment and that could be a key downside risk for oil prices in the near-term."
The dollar lost ground to the yen today as Japanese exporters and short-term speculators took advantage of its jump the previous session on US jobs data. The US dollar index dipped 0.2 per cent.
Oil prices are not bad at current levels for the Organisation of Petroleum Exporting Countries (Opec), the head of the group said yesterday, reinforcing expectations that the cartel is unlikely to cut output at a meeting next month.
With little in the way of fresh data due today, traders will be focusing this week on tomorrow's raft of Chinese oil import and production figures, which could show a new record high for crude imports as refiners ramp up, as well as global oil demand revisions from the three main official energy bodies.
US crude oil inventories could also extend their recent rise as refiners shut for maintenance, some analysts warned.
More gains in US stocks - particularly in the mid-continent area - may keep pressure on the unusually wide premium on the European Brent crude oil contract over the US grade, which has hovered around minus $3 since late July, the widest since two unprecedented declines in January and February.
But other analysts saw the trend reversing soon. The spread dipped about 15 cents to -$2.77 a barrel today.
"We believe the dislocation between WTI and Brent that has been driven by a rapid build in Cushing is not sustainable as we expect rising runs and a shut arb to correct the imbalances," Goldman Sachs said in a report. "We expect refinery runs to pick up in the coming weeks owing to improved....margins and to unplanned outages in refineries in the area coming to an end."
The number of crude oil speculators betting on further gains in New York Mercantile Exchange crude oil prices jumped in the week to August 4th, with net length rising from under 5,000 lots to over 34,000 lots, regulatory data showed.
Reuters