MELBOURNE/SINGAPORE: Oil prices gained on Tuesday, reversing overnight losses, as investors moved into risk assets and stayed away from the safe-haven U.S. dollar which hit multi-year lows.
Brent crude futures climbed 47 cents, or 1 per cent, to $45.75 a barrel at 0635 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 43 cents, or 1 per cent, to $43.04 a barrel.
Both benchmark contracts fell around 1 per cent on Monday on worries about oil oversupply, with global demand stuck below pre-Covid levels.
The dollar was last down 0.04 per cent at 92.146 against a basket of currencies, after hitting its lowest since May 2018 in the wake of the U.S. Federal Reserve's policy shift on inflation announced last week.
"It (the policy shift) really cements the fact that you're looking at negative real rates for the U.S. which will not be great for the U.S. dollar. That's good for commodities," said Louis Crous, chief investment officer at BetaShares, an Australian exchange-traded funds provider ..
The weakening U.S. dollar makes oil and other commodities priced in dollars more attractive to global buyers.
Strong Chinese manufacturing data also lifted oil prices, said Jeffrey Halley, a senior market analyst at OANDA.
The Caixin/Markit Manufacturing Purchasing Managers' Index(PMI) showed China's factory activity expanded at the fastest clip in nearly a decade in August, bolstered by the first increase in new export orders this year.
"Expectations of higher consumption, powered by a China recovery, lifted sentiment and saw both Brent crude and WTI track higher in Asia," said Halley.
"Both contracts are now close to monthly highs and are poised to shake off the range-trading malaise of the past two months," he added.
But investors were also assessing the stalled recovery in fuel demand as countries continue to battle the coronavirus pandemic with rolling Covid-19 lockdowns, analysts said.
"This has created plenty of uncertainty about whether demand for transportation fuels will ever return to normal," ANZ Research said in a note.
Ahead of the release of U.S. stockpile data from the American Petroleum Institute industry group, a Reuters poll found analysts expect U.S. crude stocks fell by about 2 million barrels in the week to Aug. 28.
Gasoline inventories are seen falling by 3.6 million barrels, while distillate inventories, which include diesel and heating oil, are expected to drop by 1.5 million barrels, six analysts polled by Reuters estimated.
Source:-economictimes.indiatimes.com