Oil Steadies After Biggest Gain in Five Weeks on Weak Dollar

(Bloomberg) -- Oil steadied after the biggest gain in more than five weeks as the dollar weakened and a risk-on tone swept across wider markets.

Brent traded above $73 a barrel after surging 3.2% on Monday, while West Texas Intermediate was near $69. A gauge of the dollar headed for a third day of losses, making commodities priced in the currency less expensive for most buyers, and Asian shares followed Wall Street higher.

Oil is still lower for the year as concerns around Chinese demand and plentiful global supply weigh on the outlook. The prompt spread for WTI — the difference between the two nearest futures contracts — traded in a bearish contango structure on Monday for the first time since February. 

The International Energy Agency has forecast a potential surplus of more than 1 million barrels a day next year as Chinese demand continues to falter, which could be even bigger if OPEC+ decides to revive output.

“We remain bearish on oil in the mid- to long-term,” said Zhou Mi, an analyst at the Chaos Research Institute in Shanghai. “OPEC+’s planned output increases and China’s demand peaking” raises the prospect for a global glut, he added.

In the Middle East, meanwhile, Lebanon and the Hezbollah militia have agreed to a US proposal for a cease-fire with Israel, according to a report from Reuters on Monday, which cited a top Lebanese official. A US official cautioned that negotiations were ongoing.

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