- Oil extends gains to trade above $88/Bbl
- Prices were supported by recent weakness in the dollar and tightness in the product market
- The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of other international currencies) fell to its lowest in four weeks yesterday
- A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay less for the same amount of goods
- U.S. Fed’s next rate announcement is expected this Wednesday
- Reports of a social media post triggered speculation that China formed a potential committee to phase out of the Covid-zero policy
- China’s Foreign Minister denied such meetings, stating he is “not aware” when asked about a formed committee at a briefing in Beijing today
- However, China reported more than 2600 new Covid cases on Sunday, its highest since August 10
- China's strict COVID curbs this year have adversely impacted business and economic activity and lowered demand for fuel
- President Biden warned against windfall taxes for oil and gas companies making record profits without reinvesting in production
- The remarks come ahead of the US midterm elections as the White House administration continues to be concerned about rising fuel costs due to heightened inflation
- “The oil industry has not met its commitment to invest in America and support the American people,” Biden said Monday. He called the industry’s profits “a windfall of war,” said Biden on Monday
- However, oil executives say they can only do so much to lower prices in the short term
- Major projects take years of planning and development and need to offer attractive long-term returns and be backed by consistent energy policies
- A windfall tax or export ban, according to Chevron CEO Mike Wirth, would be "short-sighted" because it would discourage investment in energy
- He added that “Typically if you want less of something, you tax it”