Oil prices held firm above $106 a barrel on Monday, maintaining last week's late rebound after the dollar fell and a fire hit a US refinery. US light, sweet crude for May delivery rose 13 cents to $106.36 a barrel after having leapt $2.40 a barrel on Friday, recouping all of the week's losses as investors sought shelter from the falling US dollar.
The dollar fell on Friday after a US government report showed employers slashed payrolls a third straight month in March, cutting 80,000 jobs, the biggest monthly decline in five years.
But it recouped much of its losses later on Friday, as traders said the data was not a big surprise. Investors have been shifting funds toward the commodities sector for years, a trend that many analysts see continuing as they seeking protection from inflation.
"The key driver will be continued financial investors inflows into oil," said Societe Generale in a report, reasserting their $107.50 forecast for average oil prices in the second quarter. "On balance, we take comfort in the fact that front-month crude prices appear to have found a floor at $100, and appear to be trending sideways."
Gains were also fuelled by news of a fire at Exxon Mobil's 150,000 barrel per day Los Angeles-area refinery in Torrance, California, which forced the closure of a hydrotreater, raising concerns about summer gasoline supplies. As oil prices resume climbing toward their March 17 record high of $111.80, Opec officials have stuck to their familiar refrain over the well-supplied state of the market.
"Oil supply to the market is enough and high oil prices are not due to a shortage of crude but rather it is because of the decrease in the dollar's value, shortage of refinery capacity and some political tensions in the world," Opec Secretary-General Abdullah al-Badri was quoted as saying by Iran's official IRNA news agency.
"Opec is not under any pressureto raise crude output," Badri told reporters in Tehran, according to IRNA, adding that there were no plans to hold an emergency meeting ahead of its next planned gathering in September. Opec is also concerned about the potential impact of an economic slowdown in the United States on oil demand from the world's biggest consumer.