LONDON (Reuters) - Oil rallied above $78 per barrel on Monday, snapping a five-day losing streak, as the dollar eased against a basket of currencies, but concern over the outlook for energy demand and economic recovery weighed on the market.
Oil prices began last week above $80, supported by colder winter weather in the northern hemisphere and an influx of fresh capital from money managers and funds seeking to allocate more cash to commodities this year.
But poor company and banking results, including a mixed quarterly scorecard from JPMorgan Chase & Co (JPM.N) on Friday, concerns about prospects for the global economy and oil demand as well as rising temperatures in Europe and the United States had pulled prices lower for five consecutive working days.
U.S. crude for February delivery rose 25 cents to $78.25 a barrel by the end of the shortened electronic trading session in New York, where the NYMEX floor was shut for the U.S. Martin Luther King holiday. Because of the holiday, the NYMEX will not print an official settlement price until Tuesday.
London Brent crude rose 16 cents to $77.27.
With volume relatively light, traders cautioned that the move upward could be short-lived after U.S. prices bounced from a three-week intraday low of $77.07 a barrel.
Christopher Bellew, a broker at Bache Commodities in London, said many investors were worried about the state of oil demand.
“Funds are holding sizable positions, the weather is warming in the northern hemisphere and there are concerns that there is ample supply and a fragile outlook for demand,” Bellew said. “Momentum is the key to this market, and it has gained downward momentum.”
Eugen Weinberg, head of commodities analysis at Commerzbank in Frankfurt, agreed: “Market sentiment seems to have turned after prices failed to stay above $80 per barrel.”
The dollar index, a gauge of the greenback’s performance against six other currencies, slipped to 77.115 by 2:49 EST, down from Friday’s U.S. close of 77.323 .DXY.
The prices of oil and other commodities often move inversely to the dollar because they are traded on international markets in the U.S. currency.
Crude oil prices have fallen steadily since striking a 15-month intraday high of $83.95 a barrel on January 11, dragged down by weak U.S. economic data and fears of a sluggish rebound in demand in the world’s largest energy consumer.
Oil is now almost 50 percent below its lifetime high of more than $147 a barrel hit in July 2008.
The International Energy Agency (IEA) said on Monday the end of huge economic stimulus packages around the globe threatened a modest recovery in global oil demand this year.
IEA Deputy Executive Director Richard Jones told Reuters in an interview the oil market was “pretty well supplied” so OPEC was unlikely to change output at its March meeting.
“That is something we are watching closely,” he said. “We think these are downward risks to demand.”
Traders say a raft of Chinese data this week, including fourth-quarter gross domestic product, retail sales and industrial production for December, could lift crude prices
Additional reporting by Fayen Wong in Perth; editing by Sue Thomas and Jeffrey Benkoe