By Stephanie Kelly
NEW YORK (Reuters) – Oil prices edged lower on Monday despite a weaker U.S. dollar, as rising coronavirus cases and tensions between the United States and China clouded the outlook for oil demand’s recovery.
Brent crude <LCOc1> fell 25 cents to $43.09 a barrel by 12:53 p.m. EDT (1653 GMT), while U.S. West Texas Intermediate (WTI) crude <CLc1> fell 2 cents to $41.27 a barrel.
Following the closures of consulates in Houston and Chendu, investors worried about relations between China and the United States and have retreated to safe havens, such as gold and bonds.
“In lack of larger fundamental news, oil prices are following the overall macro trends, behaving as a ‘risky asset’ and being traded lower when safe-haven assets strengthen,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Meanwhile, global cases of the new coronavirus exceeded 16 million, and the virus is surging in areas of the United States.
While oil demand has risen after plunging in the second quarter, reimposed lockdowns because of rising infection rates have made the recovery uneven.
Expectations of U.S. stimulus measures and a weak dollar, which makes dollar-denominated commodities cheaper for holders of other currencies, capped losses.
The U.S. dollar index <.DXY> reached its lowest since June 2018, hurt by deteriorating U.S.-China relations and domestic economic concerns. A weaker dollar is generally supportive for dollar-denominated oil prices.
U.S. Senate Republicans on Monday are expected to unveil a new $1 trillion coronavirus aid package.
“Massive monetary stimulus has bullish implications for oil,” analysts from Raymond James said in a note, adding that oil has historically moved upwards with inflation spikes and that the current U.S. money supply increase is unprecedented.
Brent remained on track for a fourth straight monthly gain and WTI was set to rise for a third month as supply cuts from the Organization of the Petroleum Exporting Countries and Russia provided support.
(Reporting by Stephanie Kelly in New York; Additional reporting by Florence Tan in Singapore and Dmitry Zhdannikov in London; editing by David Gregorio and Marguerita Choy)
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