Oil prices rise on weak dollar as markets price in less hawkish Fed By Investing.com

© Reuters.

By Ambar Warrick

Investing.com– Oil prices edged higher on Monday as a looming U.S. banking crisis fueled expectations that the Federal Reserve will tone down its hawkish rhetoric in coming months, although caution remained over a potential economic fallout.

Oil markets benefited from weakness in , after the Fed and other US regulators intervened over the weekend to restore faith in the US banking system following the collapse of Silicon Valley Bank (NASDAQ: ).

Markets began to scale back their expectations for the US central bank as the SVB collapse highlights the widening economic fissures caused by sharp interest rate hikes.

A weaker dollar bodes well for commodities priced in dollars, and also helps demand by making crude oil cheaper for foreign buyers.

rose 0.2% to $82.99 per barrel, while rose 0.2% to $79.92 per barrel at 22:54 ET (03:54 GMT).

But both contracts still pared steep losses from last week, as weak economic data from China and signs of sticky U.S. inflation added to concerns about a rebound in crude oil demand later this year.

Investors are also wary of any fallout from the SVB collapse, which could potentially hamper US economic growth.

The Fed said it will hold an emergency closed-door meeting later on Monday, where it is likely to discuss further action in the wake of the SVB collapse. This, combined with US data due on Tuesday, is expected to largely define the oil markets in the coming days.

But oil prices were also somewhat cheered by comments from Saudi Aramco (TADAWUL:) CEO Amin Nasser, who said crude oil markets remained tightly balanced and was cautiously optimistic about a recovery in demand.

Nasser said demand for Chinese jet fuel was increasing after the country eased most anti-COVID measures earlier this year.

The restoration of diplomatic ties between Saudi Arabia and Iran also bodes well for global crude oil markets as it could potentially restore stability in the oil-rich Middle East.

But Nasser’s comments come on the heels of Chinese data that showed an economic recovery still remained nascent in February. While recovered strongly in the country, and demand remained far below expectations.

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