By Adedapo Adesanya
Oil prices beat expectations on Monday, rising on the back of weak dollar and expected US stimulus measures but gains were capped by rising global coronavirus cases and tensions between the United States and China.
Brent crude futures gained 18 cents or 0.44 per cent to trade at $43.52 per barrel and the US West Texas Intermediate (WTI) crude futures rose 38 cents or 0.92 per cent to $41.67 per barrel.
Investors at the oil market capitalised on a week greenback on Monday, which proped up prices.
The US Dollar index reached its lowest since September 2018, weakened further by US-China relations and domestic economic concerns as coronavirus infections showed no sign of slowing.
Last week, prices found support after three groups said their potential vaccines showed promising results. But this has since proven to be short term as cases continue to rise, nearing 16.6 million globally.
According to analysts, the dollar’s slide is happening due to the problems associated with the spread of the coronavirus and uncertainty about the US economic recovery. The dollar is also reacting to the prospect of mounting deficits and expected low-interest rates.
The massive US deficit, which was at a trillion dollars at the start the year, has swollen into multi-trillion as the US spends to fight the coronavirus.
US Senate Republicans are expected to unveil a new $1 trillion coronavirus aid package that will help increase purchasing power, which will mean the ability to consume.
While fuel demand is recovering from a slump after many countries imposed strict lockdowns, this is facing a renewed threat as surging coronavirus cases are spurring preventive measures.
In Asia, fresh lockdowns were imposed and in Europe, Britain imposed a quarantine on travellers returning from Spain.
Also, the ongoing sharp deterioration in United States-China ties poses risks to both countries and the rest of the world, which means it can affect oil prices depending on the course of actions that play out.
In the latest escalation, a US consulate in Chengdu in southwestern China shuttered on Monday, ordered by China to close in retaliation for the US shutting down its consulate in Houston last week.
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