Singapore, Jan. 5 (BNA): Oil prices rebounded Thursday amid dollar weakness and as investors exited to buy the dips after two sessions of heavy losses, despite economic worries capping the recovery.
Brent crude futures rose 75 cents, or 1.0%, to $78.59 a barrel by 0400 GMT, while US West Texas Intermediate crude futures rose 77 cents, or 1.1%, to $73.61 a barrel, according to Reuters reports.
The large declines in the past two days were driven by fears of a possible global recession, especially since the short-term economic indicators in the world’s two largest oil consumers, the United States and China, appeared shaky.
“After the heavy sell-off since the beginning of the week, it appears that oil prices have been trying to take advantage of some weakness in the US dollar this morning for some time,” said Jun Rong Yip, market strategist at IG.
He added that “the second month of contraction in the US manufacturing PMI continues to reflect a continued slowdown in economic activities, which may leave buyers turning away” from the market.
The cumulative declines of Brent and WTI by more than 9% on Tuesday and Wednesday were the biggest two-day losses at the start of a year since 1991, according to Refinitiv Eikon data.
Reversing the near-term downtrend, benchmark oil futures fell back into the shadow of trading in Asia on Thursday, meaning spot prices were below delivery prices months later.
Economic data from the US weighed on prices as US manufacturing contracted further in December. The ISM Purchasing Managers’ Index (PMI) for manufacturing fell for the second consecutive month in November, to 48.4 from 49.0. The Institute for Supply Management (ISM) said it was the weakest reading since May 2020.
At the same time, a survey by the US Labor Department showed that employment fell less than expected, sparking fears that the Federal Reserve will use the tight labor market as a reason to keep interest rates higher for longer.
A weak dollar has helped support oil prices, as it usually boosts demand as dollar-denominated commodities become cheaper for holders of other currencies.