LONDON: Oil prices, which have been driven higher for the past four weeks, were steady on Monday, with holidays in Singapore, London and New York dampening trade, as rising concerns over demand recovery offset supply cuts.
Brent was flat at $35.13 a barrel, while US oil gained 10 cents, or 0.3 percent to $33.35 a barrel. Both are down around 45 percent so farthis year.
“Uncertainty around the current travel patterns in the US is so great that the American Automobile Association did not release its Memorial Day travel forecast,” Bjornar Tonhaugen, head of oil markets at Rystad Energy, said.
Rising tensions between the US and China, the world’s largest oil consumers, over moves by Beijing to impose security legislation on Hong Kong also fueled concerns about the outlook for demand.
Relations between Washington and Beijing have soured since the coronavirus outbreak, with the two countries already at odds over Hong Kong, human rights, trade and US support for Chinese-claimed Taiwan.
Prices are finding support from global supply cuts with the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, now nearly a month into a deal to voluntarily withhold 9.7 million barrel per day of production.
And the US rig count, an early indicator of future output, fell by 21 to a record low 318 in the week to May 22, data from energy services firm Baker Hughes showed.
“The huge decline in global oil production has doubtless been the key factor in the latest surge in oil prices,” Commerzbank said.
Meanwhile, the euro steadied around the $1.09 level on Monday in a potentially big week for European policymakers as they debate the outlines of a recovery fund aimed at helping member nations.
Austria, the Netherlands, Denmark and Sweden want loans from a time-limited fund for nations struggling to recover from the pandemic, rather than the grants proposed by France and Germany last week for the EU’s coronavirus recovery plan.
The Franco-German plan sent the euro rallying above $1.10 last week before the much-expected counter proposal by the four countries pushed it back below $1.09.
The rival proposals come before the European Commission’s own plans for the recovery fund on Wednesday and any watered down proposals from the original plan would be perceived as
On the other hand, “if the Franco-German debt proposal (miraculously) passes the test during the coming week, we reckon that it would be a major euro positive event,” Nordea strategists said.
On Monday, the single currency steadied around $1.09 but remained about 5 percent below a 2020 high of near 1.15 hit in early March.
Elsewhere, the US dollar erased earlier gains and edged lower on the day. The greenback, which tends to behave like a safe haven asset at times of market turmoil and political uncertainty, was steady near a one-week high at 99.74.
The Australian dollar, by dint of its strong trade connections with China and the offshore yuan, led losers against the US dollar.
More turbulence for US-China relations is prompting some investors such as UBS Wealth Management to hold a “defensive” position in Hong Kong. “(The) larger risk for global investors is what happens if it becomes further enmeshed in broader relations,” said Mark Haefele, its chief investment officer.
With financial markets in Singapore, Britain and the US closed for public holidays on Monday, the weekend developments hit risk aversion in broader markets in early trade.
Sterling was also on the back foot against both the dollar and the euro as political pressure grew on British Prime Minister Boris Johnson to fire senior adviser Dominic Cummings.
Cummings, the architect of the 2016 campaign to leave the EU and widely considered to be Johnson’s most influential strategist, came under pressure after reports he traveled to northern England from London during a nationwide lockdown in March when his wife was ill with COVID-19 symptoms.