Crude oil prices surged higher on Monday, tracking gains in most markets during Asian trading hours after a move by the Chinese central bank to ease monetary policy. This helped lift market sentiment.
Crude for March delivery rose to $105.19, the highest level since May of last year, and up from Friday’s New York close of $103.91.
Oil prices have been rising sharply since end of last week, reaching nine-month highs, as rising optimism about the resolution of the Greek debt crisis drove investor interest. Meanwhile geopolitical concerns regarding the Iran oil embargo also pushed oil prices higher.
Over the weekend, the People’s Bank of China cut major commercial banks reserve requirement ratio by 50 basis points. This means the amount of money banks must hold in reserve was reduced, thereby increasing their ability to lend more and in turn increasing overall liquidity in the Chinese economy. The move is expected to stimulate growth in the world’s second-largest economy.
This news, coupled with expectations of a second bailout for Greece when Eurogroup ministers meet later Monday, helped lift stocks and commodities during the Asian session.
A weaker U.S. dollar also helped buoy oil prices, with the ICE dollar index, hich measures the greenback’s performance against a basket of six other global rivals, dropping to 79.082 from 79.334 in North American trading late Friday.