Oil bounces higher as U.S. dollar’s strength eases

Oil prices rose in thin trade in early Asian hours on Monday as the U.S. dollar’s strength eased while investors awaited data from China to gauge demand at the world’s top crude oil importer.

Brent crude futures rose 85 cents, or 0.9%, to $92.48 a barrel by 0019 GMT, recovering from a 6.4% fall last week. U.S. West Texas Intermediate crude was at $86.34 a barrel, up 73 cents, or 0.9%, after a 7.6% decline last week.

Oil found support from a combination of factors, including Chinese President Xi Jinping‘s comments at the Party Congress that reassured accommodative policies for the economy, a positive sign for demand outlook, CMC Markets analyst Tina Teng said.

“U.S. dollar index futures were lower today, which also provided a rebounding opportunity for the oil markets,” she added. A weaker dollar makes oil more affordable for holders of other currencies.

China is expected to release trade and economic data this week. Although its third-quarter GDP growth could rebound from the previous quarter, Xi’s stringent COVID-19 policy has the world’s No. 2 economy facing what will most likely be its worst performing year in almost half a century.

Looking ahead, oil prices are expected to remain volatile as production cuts by OPEC+ will tighten supplies ahead of the European Union embargo on Russian oil, while a strong U.S. dollar and further interest rate increases from the U.S. Federal Reserve limit price gains.

St. Louis Fed President James Bullard said on Friday inflation had become “pernicious” and difficult to arrest, and warranted continued “frontloading” through larger increases of three-quarters of a percentage point.

Member states of the Organization of the Production Exporting Countries and their allies, including Russia, lined up on Sunday to endorse the steep production cut agreed to this month after the White House, stepping up a war of words with Saudi Arabia, accused Riyadh of coercing other nations into supporting the move.

OPEC+ pledged on Oct. 5 to cut output by 2 million barrels per day, which will lead to an actual drop of about 1 million bpd as some members are already producing below their targets.

Despite this, top exporter Saudi Arabia will keep exports to key Asia markets steady in November.

(Reporting by Florence Tan. Editing by Gerry Doyle)