Oil edged higher with help from a weakening dollar while a worsening demand picture in parts of the world continued to hold back prices from another breakout.

Futures in New York rose 0.4 per cent Monday after trading in a US$1 range during the session. Total road fuel sales in France remained lower compared to the same time in 2019, while a key refiner in India is slashing oil processing rates as the virus rapidly spreads and lockdowns pummel fuel use in the country. The Bloomberg Dollar Spot Index headed for the lowest since late February, boosting the appeal of commodities priced in the currency.

“Energy consumption in areas that are reopening faster than others is showing the increased demand for oil,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. “Other places will start to reopen one after another. It’s unclear when we’ll get to fully or more than 80 per cent vaccinated, but that’s when crude oil can take off.”

WTI inches higher Monday after breaking out of its range last week.

While rising momentum in the U.S. vaccination campaign is boosting optimism around a demand rebound there, the market is holding back from testing this year’s highs as it waits for other countries to narrow the gap. Oil’s forward curve is pointing toward growing confidence, with the widely watched spread between the nearest December contracts widening to its most bullish backwardation structure in roughly a month.

“U.S. demand seems to be healthy, and that’s giving us support,” said Gary Cunningham, director at Stamford, Connecticut-based Tradition Energy. However, “we still have questions around international virus outbreaks, and we’re seeing troubling numbers in India that are forcing them to shut down infrastructure.”

Prices

• West Texas Intermediate for May settlement, which expires Tuesday, gained 25 cents to settle at US$63.38 a barrel
• The more-active June contract increased 24 cents to US$63.43 a barrel
• Brent for June delivery rose 28 cents to US$67.05 a barrel

In physical markets, U.S. sour crudes are signaling strength as nationwide refineries runs have increased to the highest in over a year in recent weeks. The premium for Southern Green Canyon against Nymex oil futures is near the highest since late February, while other sour grades like Mars and Poseidon have also strengthened in the past couple months.

Traders are also following high-level talks between Iran, the U.S. and other nations aimed at ending a standoff over the nuclear deal abandoned by former President Trump. Washington described negotiations as “constructive,” while the Islamic Republic signaled it was ready to debate details to revive the accord. An agreement could see U.S. sanctions on Iranian oil exports lifted.

Related news:

• OPEC and its allies are discussing downgrading next week’s full-scale ministerial meeting, delegates said, a signal the coalition may stick with plans to gradually revive oil production.
• Iran said on Monday it would welcome any talks with Saudi Arabia after Iraq intensified its mediation between the feuding Middle Eastern powers at a critical juncture.
• Libyan oil production dropped to below 1 million barrels a day for the first time in months, as delays in receiving funds for infrastructure repairs forced a halt at one of the nation’s main ports.