Oil climbed above $81 a barrel yesterday, extending last week’s 2% rise, as weakness in the dollar continued to provide support, despite doubts about the strength of the US economy.
Analysts said the dollar, which is slipping towards a 15-year low against the yen, could, along with geo-political tensions in the Middle East, continue to bolster oil prices.
Prices closed above $80 a barrel last week for the first time since May.
“I think technically the market has been on an uptrend for the last couple of weeks, and that’s sustained,” said Tony Nunan, a risk manager with Mitsubishi Corp in Tokyo.
“The dollar’s weakening is part of why crude has been strong.” A weak dollar tends to boost commodities priced in the greenback as they become cheaper for other currency holders.
US crude for September delivery rose $1,05 to $81,75 a barrel by 0958 GMT. The contract fell $1,31 or 1,6% to settle at $80,70 a barrel on Friday, but ended the week 2,2% higher. London Brent crude gained $1,15 to $81.31.
Nunan said US crude may try to scale a recent high of $82,97 hit earlier this month, but the slow economic recovery in the United States could keep a lid on the market for now.
The latest US employment figures on Friday showed the world’s largest economy shed 131 000 jobs in July, more than twice the forecast drop.
Investors will watch China’s trade and industrial output data due mid-week to gauge how the country’s economy is faring, with the Ministry of Commerce having warned that the second half of the year would be a “grim” period for its exporters.
Rising Chinese oil demand has been one of the main factors pushing prices higher, analysts said, but there are concerns its rate of economic growth could slow.
Analysts at Australia & New Zealand Bank said reports of escalating geopolitical tension in the Middle East could provide some support to oil prices.
Iran showed off four new domestically made small submarines on Sunday that it said would bolster its defence capability as it vows to confront any military threat from countries opposed to its nuclear programme.
In a sign that many investors remain bullish on oil prices, open interest positions remained heavy at the September $85, $90 and $95 call options on Friday, while money managers also increased net long crude oil positions on the New York Mercantile Exchange in the week through August 3.
On the weather front, Tropical Storm Colin weakened to a tropical depression in the Atlantic Ocean on Sunday as it passed west of Bermuda, the National Hurricane Centre said, adding the system could dissipate later in the day.