Oil follows Wall Street higher as dollar weakness lifts markets

Oil rose as the dollar tumbled, energizing markets while investors continue to evaluate the potential for slowing commodities demand against near-term supply tightness.

West Texas Intermediate traded near US$86, temporarily finding direction from equity markets, which have been recently boosted by earnings reports. The dollar slid, providing an extra boost for commodities that are priced in the currency. Since late September crude prices have been bouncing in a range of about $17 as traders weigh interest rate hikes that menace economic expansion against planned output cuts from the Organization of Petroleum Exporting Countries and its allies.

Oil volatility has declined as prices have struggled for direction. For the global Brent benchmark, a gauge of implied volatility fell to its lowest level since the middle of August. A weekly U.S. crude report Wednesday may give provide some cues to market fundamentals and guide prices accordingly.

Crude has remained heavily influenced by broader market trends and shifts in the dollar in recent weeks as central banks embark on one of the most aggressive rate hike cycles in decades. Investors are weighing concerns about the impact of a global economic slowdown and tighter monetary policy against the scope for a reduction in supply. JPMorgan Chief Executive Officer Jamie Dimon said at a conference that he is currently more worried about geopolitical tensions than the severity of a forthcoming recession, however.