First Published: 2017-07-31

Oil prices build on last week’s rally
Oil prices surge as dollar continues its slide against yen following concerns over gridlock in Washington, renewed tensions on Korean peninsula.
Middle East Online

LONDON - Oil prices surged Monday to build on last week's rally as the dollar clawed back losses following concerns over gridlock in Washington and renewed tensions on the Korean peninsula.

Both main crude contracts made strong gains, with WTI testing $50 a barrel for the first time since late May and Brent heading towards $53, while mining giants BHP Billiton and Rio Tinto saw their share price rise as commodities strengthened.

On equity markets, Tokyo closed lower as the yen hardened against the dollar earlier Monday while Shanghai edged up, shrugging off slightly lower than expected purchasing managers' index (PMI) data, a gauge of factory conditions.

Hong Kong advanced sharply in afternoon trade to cap a strong month which has seen the Hang Seng set for its biggest gain since January.

Asia-focused banking giant HSBC was one of the index's strongest movers after it announced forecast-beating profits.

Analysts said a host of factors was pushing investors' newfound optimism in oil.

"Inventories are showing massive drawdowns, Saudi Arabia seems intent on playing its role as the world's swing producer ahead of the Aramco IPO, impending sanctions on Venezuela by the US will almost certainly be oil price supportive with a weaker US dollar and conflict within Washington DC all lending a hand," said Jeffrey Halley, senior market analyst at OANDA.

"There also appears to be less urgency by shale producers to hedge forward production for now which has snuffed out previous rallies."

- Japanese economy 'stronger' -

The yen's rise came as the dollar was earlier dragged down by increasing uncertainty in the US capital after another failed attempt at healthcare reform, while the currency also took a hit from US GDP data Friday which cast further doubt on any early interest rate increase from the Federal Reserve.

Renewed tensions following North Korea's latest launch of an intercontinental ballistic missile has also aided the yen, considered a safe bet in times of turmoil.

Stephen Innes, who heads Asia-Pacific trading at forex firm OANDA, played down hopes of a sustained US dollar rebound.

"There remains real appetite to sell the USD ... as it's becoming evident to all the greenback has problems, and the can of worms is barely open."

Meanwhile, Japan's industrial output for June rose 1.6 percent from the previous month, ahead of forecasts of 1.5 percent and rebounding with global demand.

"Demand for information technology investment and a recovery in global capital investment are supporting production in Japan," said Masaki Kuwahara, senior economist at Nomura Securities in Tokyo.

"The economy itself is stronger than I had expected."

However, manufacturing data from the world's second largest economy pointed to a modest slowdown.

The latest PMI came in at 51.4 in July, the National Bureau of Statistics (NBS) said, down from the 51.7 reading in June and shy of a forecast of 51.5 by analysts surveyed by Bloomberg News.

"July's PMI signals a slight softening of the manufacturing sector," Raymond Yeung of Australia & New Zealand Banking Group said.

In Europe, London opened higher, supported by solid share-price gains for the heavyweight mining sector

 

Pentagon skeptical about Russia's Syria pullout claims

Senior Saudi prince blasts Trump's "opportunistic" Jerusalem move

Kuwait ruler’s son named defence minister

EU accused of complicity in Libya migrant rights violations

Saudi Arabia lifts decades-long ban on cinemas

Israeli sentenced to four years for arson attack on church

Erdogan risks sabotaging fragile relations with Israel

6.2-magnitude earthquake strikes Iran

Two Gazans killed by Israeli ‘strike’, Israel denies claim

French FM accuses Iran of carving out ‘axis’ of influence

Somali journalist killed in front of children

Over 170 dead after South Sudan rival cattle herders clash

Russia begins partial withdrawal from Syria

Russia weary of returning IS jihadists before World Cup, election

EU says Syria war ‘ongoing’ despite Russia pullout

Istanbul nightclub gunman refuses to testify

Integrating Syrians in Turkey carries implications

US opinion views Muslims and Arabs more favourably but political affiliation makes a difference

Iranian conservative protesters say Trump hastening end of Israel

Jordan referred to UN for failing to arrest Sudanese president

Turkey demands life for journalists in coup bid trial

Netanyahu expects EU to follow suit on Jerusalem

Putin orders withdrawal of ‘significant’ amount of troops from Syria

Putin to meet with Sisi in Cairo

GCC at a critical juncture

Houthi rebels tighten grip on Sanaa after Saleh’s assassination

Israel’s Syrian air strikes risk renewing escalation as Iran expands presence in Golan

Qatar to acquire 24 Typhoon fighters from UK

Bahraini civil society group criticised after Israel visit

Israel PM faces renewed pressure in Europe

Palestinian stabs Israeli guard in ‘terrorist’ attack

UAE’s Sheikh Mohammed says US Jerusalem decision could help terrorists

Fateh encourages more protests, refuses to meet Pence

Chinese electric carmaker to open Morocco factory

Iraqi victory over IS remains fragile

Morocco’s renewed ties with South Africa likely to consolidate support for Western Sahara stance

Lebanese security forces fire tear gas at protestors

Syria’s justice system: ‘working without a written law'

Egypt revives controversial desert capital project

Iran sentences fugitive ex-bank chief to jail

Iraq announces 'end of the war against Daesh'

Israeli air strike kills 2 in Gaza

UK foreign minister in Iran to push for Briton's release

Turkey's Erdogan seeks to lead Muslim response on Jerusalem

Iraqi Christians celebrate in town retaken from IS