Oil prices recovered from four straight sessions of declines to move higher supported by a weaker dollar with the August front month contract set to expire at the end of the session.
Light sweet Crude for August delivery most recently advanced by 60 cents or 11.2% at $50.75 a barrel on the New York Mercantile Exchange. The August contract lost 1.5% in the previous session and is set to expire at the end of the session.
The more actively traded September contract, set to become the front month contract from Wednesday, jumped 26 cents or 0.5% to trade at $50/70 a barrel.
Brent for September Delivery, the global benchmark, most recently added 39 cents or 0.7% to trade at $57.04 a barrel on the London-based ICE Futures Exchange.
“After staunchly defending the psychological $50 dollar mark, Nymex oil prices are getting launched higher from significantly oversold conditions to rally strongly amid a retracing dollar,” Matt Smith, director of commodity research at ClipperData, told Market Watch.
The greenback retreated from its three month high achieved in the previous session to trade lower against a basket of foreign currencies on weaker than expected corporate earnings.
A weaker dollar is bullish for the demand of commodities like oil denominated in dollars as it makes the less expensive to holders of foreign currencies.
Weaker than expected quarterly earnings from IBM and United technologies cast doubt on the strength on the economy leading to speculation that the Federal Reserve’s rate hike would happen later than widely expected.
The Wall Street Journal Dollar Index, which tracks the value of the dollar against a basket of foreign currencies, was most recently lower 0.2%.
The oil rally was however capped by expectations of increased output from Iran after Iran and the world powers last week reached an agreement to curb its nuclear program in exchange for lifting economic sanctions against it.
Traders also expected crude inventories to rise again this week after services provider Genscape reported a growth in stockpiles at Cushing last week.
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