Oil Advances Above $66 as Week Opens With the Recovery in Focus

Oil topped $66 a barrel as traders assessed prospects for further recovery from the pandemic and the outlook for rising global demand as the OPEC+ alliance presses on with output curbs to drain inventories.

West Texas Intermediate in New York gained as much as 0.8% after easing on Friday to cap a narrow weekly loss. The weekly U.S. Covid-19 death toll sank to a four-month low and new infections dropped, boosting the outlook for energy consumption in the world’s largest economy. Still, there are pockets of concern in the Asia-Pacific, including a fresh outbreak in Hong Kong.

Crude has rallied strongly in the opening months of 2021, supported by the vaccine-aided recovery from the pandemic and the decision by the Organization of Petroleum Exporting Countries and its allies to keep a tight rein on supplies. That combination — plus an uptick in attacks on Saudi oil infrastructure by Houthi rebels — helped London’s Brent crude to top $71 a barrel last week.

Data from China later Monday will confirm roaring growth in activity in the first two months of 2021, although the figures will be skewed by comparisons from a year ago when the nation was the first in the world to go into lockdown. The figures from Asia’s top economy will include industrial output and retail sales.

The OPEC+ alliance is wagering its tighter-for-longer policy on supply curbs will buttress higher prices without provoking a resurgence in U.S. shale output. On Friday, Baker Hughes Co. data showed the U.S. rig count little changed.

The gain in energy markets on Monday came despite a firmer tone in the dollar. The U.S. currency has advanced, in part as Treasury 10-year yields topped 1.6% with the roll-out of vaccines and passage of a U.S. fiscal package.

In addition, WTI’s prompt timespread flashed a warning, holding at 3 cents in contango, a bearish pattern where near-term prices are cheaper than those further out. A week ago, the front-month contract was backwardated.