Oil prices ticked up Asian trade, reversing a weak start as a recovery in Chinese demand and a weaker dollar provided support to a market rattled by the prospect possible further US interest rate increases.
After initially slipping in early trading, Brent crude futures were up 25 cents, or 0.30 per cent, to $83.03 per barrel by 0700 GMT. West Texas Intermediate crude futures (WTI) ticked up by 23 cents, or 0.30 per cent, to $76.91 a barrel.
Market sentiment was fragile as worries about further monetary tightening by the Fed have been exacerbated by high crude oil inventories in the US, analysts from ANZ Bank said in a note on Monday morning.
"It's like the battle of surging activity data in the East meets macro malaise in the West", said Stephen Innes, managing partner of SPI Asset Management, commenting on the competing sentiment drivers in the crude market.
"From an oil trader's perspective, the US dollar should pull back as traders give up on a re-acceleration of Fed hikes; this, in turn, clears a path for more robust Chinese fundamentals to dominate commodity trading," Innes added.
A weaker dollar makes oil cheaper for holders of other currencies, lending support to oil prices.
The failure of Silicon Valley Bank and New York-based Signature Bank and concerns about possible contagion led to a selloff in US assets at the end of last week, which has also put downward pressure on the dollar.
Comments on Sunday from Saudi Aramco CEO Amin Nasser on crude demand from China also provided some support.
"If you considered China opening up and a pick up in jet fuels and very limited spare capacity, we are talking 2 million barrels, so as I said we are cautiously optimistic in the short to midterm and the market will remain tightly balanced," he said.
The comments come in the wake of the announcement that Riyadh and Tehran had agreed to restore diplomatic relations in a China-brokered deal, potentially paving the way to the revival of a nuclear deal that would allow exports of currently-sanctioned Iranian crude.
Oil's fluctuating start to the week follows positive momentum on Friday, when US employment data surprised to the upside. Data for February beat expectations, with nonfarm payrolls rising by 311,000, compared with expectations of 205,000 jobs added, according to a Reuters survey.
From a medium- to long-term supply perspective, energy services firm Baker Hughes said on Friday US energy firms this week cut the number of oil and natural gas rigs operating for a fourth week in a row for the first time since July 2020. -Reuters