Renewed hopes of China’s increased crude consumption boosted oil alongside a weaker dollar at the start of the week.
(Bloomberg) — Renewed hopes of China’s increased crude consumption boosted oil alongside a weaker dollar at the start of the week.
West Texas Intermediate futures surged as much as 4% to trade above $76 a barrel Monday before paring gains. China issued a fresh batch of crude oil import quotas, a signal that the world’s largest purchaser is gearing up to meet higher demand. A weaker dollar also boosted the appeal of commodities priced in the currency.
However, with the forward curve still signaling weakness, the rally eventually triggered many traders to sell futures as they neared $77 a barrel. Last week, money managers cut net bullish WTI bets to a 20-week low.
This week also marks the beginning of the annual rebalancing of the largest commodity indexes, a period usually characterized by volatile flows across raw materials markets. The period should see more than $1 billion of inflows into the global Brent benchmark, while leading to outflows from WTI, according to separate estimates from Citigroup Inc. and Societe Generale SA.
Crude had a sluggish start to the year, posting a drop of around 8% last week as nearby oil markers flash signs of weakness. For now traders are awaiting signs of a meaningful uptick in Chinese demand, though there has been improvement in mobility gauges over recent days.
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