Oil prices ticked higher Monday, snapping a two-session losing streak as the dollar fell and the market weighed signals from Saudi Arabia that OPEC would be willing to extend production cuts beyond 2018.
U.S. crude futures rose 12 cents, or 0.19%, to $63.49 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 42 cents, or 0.61%, to $69.03 a barrel on ICE Futures Europe.
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Oil's trajectory Monday wasn't straightforward -- prices wavered between gains and losses throughout trading. Oil dipped as the dollar pared losses on signs that a U.S. government shutdown could be resolved. But the dollar resumed its slide, which helped lift oil prices, analysts said.
A weaker dollar makes dollar-traded oil less expensive for foreign buyers, which can lift crude futures. The dollar's influence on crude prices has been less pronounced in recent months, but some observers say it is due to make a comeback as a force moving oil prices. The currency has been pummeled in recent weeks amid U.S. political uncertainty and signs that central banks will tighten monetary policy more quickly in response to robust economic growth.
"The losses in the dollar have reached a point where they're going to be influential on commodity prices," said John Kilduff, founding partner at Again Capital. Oil "really seemed to be finally reacting to this dollar selloff."
Oil surged at the end of last year and in the first weeks of 2018, pushed higher by a combination of strong demand, renewed geopolitical risk and tightening supplies following more than a year of restrained output from the Organization of the Petroleum Exporting Countries. Investors have amassed a record net bullish position on crude prices.
But the rally started to sputter last week amid concerns that the rapid rise in prices could bring on a wave of new production. Oil prices fell Friday after the International Energy Agency released its monthly oil market report, predicting U.S. crude production would climb above 10 million barrels a day this year, surpassing output from Saudi Arabia and rivaling that of Russia -- the world's two-largest crude producers.
"Oil prices had chalked up losses again last week for the first time in five weeks, meaning their upward momentum seems to be faltering for now, " according to analysts at Commerzbank.
But the International Monetary Fund said Monday that the global economy will strengthen in 2018, which could mean another year of big gains in demand for oil, something that took market participants by surprise last year. And prices could still find support from Saudi Arabia's ongoing commitment to hold back crude output.
"We should not limit our efforts to 2018. We need to be talking about a longer framework for our cooperation," Saudi Arabian Energy Minister Khalid al-Falih said on the sidelines of an OPEC meeting on Sunday in Oman. Commenting on an OPEC-led agreement with nonmember allies like Russia to curb output, Mr. Falih said the group's message should be: "This is something that is here to stay."
OPEC, of which Saudi Arabia is the de facto leader, and 10 members outside the cartel agreed late last year to extend an agreement to reduce the world's oil production by 1.8 million barrels a day through the end of this year. The accord was first struck at the end of 2016 to rein in a global oil glut that has weighed on prices since 2014.
But others don't put much stock in talk of additional cooperation and believe that OPEC's commitment could waver in the face of higher prices.
"At close to $70 Brent, there's a little bit of lingering concern about whether these producers will start to cheat," said Gene McGillian, research manager at Tradition Energy. "I think the market's vulnerable to a correction."
Gasoline futures rose 1.65 cents, or 0.89%, to $1.8801 a gallon. Diesel futures fell 0.15 cent, or 0.07%, to $2.0569 a gallon.
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(END) Dow Jones Newswires
January 22, 2018 16:10 ET (21:10 GMT)
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