Oil on track for monthly gain boosted by weak dollar

However, weak refining margins and lower Chinese oil demand put pressure on prices

Brent surged 0.7 per cent to trade at $43.25 per barrel on Friday. AP

Oil prices rose on Friday and were on track for monthly gains, boosted by a weaker dollar in the face of continuing concerns over the recovery of the US economy as the coronavirus ravages the world's biggest economy and oil consumer.

Brent surged 0.7 per cent to trade at $43.25 per barrel, while the US crude gained 0.6 per cent to $40.18 per barrel

Brent is on track for a fourth month of gains and US crude is heading for a third as both rise from depths hit in April, when much of the world was in lockdown.

The dollar extended its dramatic fall on Friday and was on course for its biggest monthly drop in a decade after news on Thursday that US gross domestic product collapsed at a 32.9 per cent annualised rate - the steepest decline in output since records began in 1947.

Investors typically use dollar-denominated commodities as safe havens when the currency weakens and vice versa.

"Global stimulus and a weak dollar will continue to support oil prices as historically oil is seen as a hedge against inflation," said Keshav Lohiya, chief executive of consultancy Oilytics.

Globally, the economic outlook has dimmed again, with increasing coronavirus infections raising the risk of renewed lockdowns and threatening any rebound, according to a poll of more than 500 economists.

Weaker refining margins around the world, lower Chinese oil demand and high crude inventories are putting further pressure on oil prices, Mr Lohiya said.

Germany also registered a record decline in output, with Europe's largest economy contracting by 10.1 per cent quarter-on-quarter.