Oil prices rose by another 0.2% as geopolitical tensions in the Middle East offset the renewed rise in the US currency. The rally in global stock markets is also helping to bolster appetite for risky assets, including oil.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.10% to 104.15.
Regarding the situation in the Middle East, Houthi militants have continued to fire missiles at vessels off the coast of Yemen, forcing many tankers to make costly diversions. Meanwhile, the Israeli Prime Minister rejected Hamas' latest offer for a cease-fire and the return of hostages held in the Gaza Strip, but U.S. Secretary of State Anthony Blinken said there was still room for negotiations to reach an agreement.
A stronger-than-expected reduction in gasoline and distillate inventories in the United States also supported the oil market. Last week, distillate stocks decreased by 3.2 million barrels to 127.6 million barrels. Experts expected a drop of 1 million barrels. Gasoline stocks fell by 3.15 million barrels, while analysts predicted an increase of 140 thousand barrels.
In Asia, the prospects for China's largest importer remain challenging. Data published by the National Bureau of Statistics (NBS) showed that in January the consumer price index fell by 0.8% per annum, accelerating compared to December (-0.3% per annum), and exceeding economists' forecasts (-0.5% per annum). It was also the sharpest drop since September 2009, indicating continued weakness in domestic demand. On a monthly basis, consumer inflation rose by 0.3% compared with an increase of 0.1% in December. Consensus estimates suggested an increase of 0.4%. The report also showed that in January, the decline in producer prices slowed to 2.5% per annum from 2.7% per annum in December. Economists had expected a decrease of 2.6% per annum. "Today's data shows that China is facing constant deflationary pressures. Therefore, the government should take swift and aggressive action to avoid the risk of entrenching deflationary expectations among consumers," Pinpoint Asset Management said.