Oil Edges Higher Toward $64 on Weaker Dollar, Demand Optimism

Oil edged higher toward $64 a barrel, aided by a weaker dollar, as traders monitored a patchwork demand recovery from the pandemic.

West Texas Intermediate rose 0.2% in Asia after closing modestly higher on Monday. In the U.S., refinery runs climbed to the highest in over a year as economic activity picked up, but oil demand in India is suffering amid a brutal fresh wave of coronavirus infections. The dollar fell for a sixth straight session on Monday, boosting the appeal of commodities priced in the currency.

Crude is up more than 30% in 2021 as investors bet the reopening of economies will stoke consumption and keep draining global inventories. As demand picks up, the Organization of Petroleum Exporting Countries and its allies are planning a cautious return of some supply from next month. The OPEC+ grouping may skip a full-scale ministerial meeting planned for next week, possibly indicating members don’t see much need to revise current strategy.

Oil’s forward curve suggests growing confidence, with the widely watched spread between WTI’s contracts for December this year and 2022 at the widest backwardation in about a month. That’s a bullish pattern, with prices for the final month of 2021 more than $4 a barrel above those a year further out. Brent’s prompt spread is also backwardated, with a gap of 60 cents a barrel.

At present, OPEC+ has decided to revive just over 2 million barrels a day of the 8 million it’s been keeping offline, with the supply to be returned in stages over the three months to July. If the ministerial gathering is scrapped, the coalition may go ahead with just a monitoring committee meeting on April 28.

Later Tuesday, investors across markets will track a high-profile speech from China’s President Xi Jinping at the Boao Forum on Asia. The address is expected to touch on the risks and challenges that the world is facing, and what solutions China can offer to promote development and prosperity.