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LONDON -Oil prices extended gains on Monday, boosted by a weaker dollar and tight supplies as concerns over gas supply from Russia mounted, offsetting demand fears brought on by a possible recession and China lockdowns.
Brent crude futures for September settlement rose by $4.41, or 4.26%, to $105.65 a barrel by 1235 GMT, having gained 2.1% on Friday.
U.S. West Texas Intermediate (WTI) crude futures for August delivery were up $4.11, or 4.191%, at $101.76 after rising by 1.9% in the previous session.
The U.S. dollar retreated from multi-year highs on Monday, supporting prices of commodities ranging from gold to oil. A weaker dollar makes dollar-denominated commodities more affordable for holders of other currencies.
Both Brent and WTI last week registered their biggest weekly declines for about a month on fears of a recession that would hit oil demand.
Russian gas export monopoly Gazprom declared force majeure on gas supplies to Europe to at least one major customer, according to the letter seen by Reuters, potentially ratcheting up the continent’s supply crunch.
A trading source said the letter concerned supplies through the Nord Stream 1 pipeline, a major supply route to Germany and beyond.
“Brent crude will find support at the end of the week if Russia does not turn the gas back on to Germany after Nord Stream 1 maintenance,” said OANDA senior analyst Jeffrey Halley.
Meanwhile, mass COVID-testing exercises continue in parts of China this week, raising concerns over oil demand from the world’s second-largest oil consumer.
“Mounting demand concerns on another spike in COVID-19 cases in China amid a broader slowdown and resilient Russian output have weighed on oil prices recently,” Barclays said in a note.
“Yet we remain constructive as rerouting supplies will become harder as we inch closer to the implementation of EU sanctions.”
However, supplies remain tight. As expected, U.S. President Joe Biden’s trip to Saudi Arabia failed to yield any pledge from the top OPEC producer to boost oil supply.
Biden wants Gulf oil producers to step up output to help to lower oil prices and drive down inflation.