Oil prices rose for a second day on Thursday, supported by U.S. data showing crude inventories had dipped after rising for nine weeks and a weaker dollar after the U.S. Federal Reserve signaled it would not hike rates faster than expected.
But the rebound from three-month lows has been cautious, with investors looking for more proof that OPEC-led supply cuts will bring a sustained drawdown in stockpiles since OPEC and non-OPEC producers began cutting back output on Jan. 1.
“The dollar is weaker due to the U.S. Fed. I don’t think it is going to be enough to bring some follow-through buying to crude oil. We need something more substantial,” said Olivier Jakob of Swiss consultancy Petromatrix.
Brent crude oil was up 60 cents to $52.41 a barrel by 1005 GMT, recovering from Tuesday’s slide to $50.25, its lowest level since Nov. 30 when the Organization of the Petroleum Exporting Countries announced plans to cut supplies.
U.S. light crude oil was up 55 cents at $49.41 a barrel, also climbing from a three-month low.
Prices have risen by 2 percent so far this week, after data showed U.S. stocks slipped back from record highs.
The U.S. Energy Information Agency said stocks fell 237,000 barrels in the week to March 10, defying forecasts of a 10th weekly rise. [EIA/S]
Further support came on Wednesday from the International Energy Agency (IEA). Although global inventories rose in January, the agency said the oil market could be in deficit by 500,000 barrels per day (bpd) in the first half of 2017.
Reuters reports that OPEC has broadly complied with its commitment to cut 1.2 million bpd in the first half of the year, but investors have been unnerved as stocks have continued climbing. The IEA told investors to be patient as cuts would take time to feed through. [IEA/M]
Thursday’s oil price rise seemed largely powered by a dip in the dollar, providing support across the board to commodities, analysts said. A decline in the U.S. currency makes dollar-denominated commodities less expensive for holders of other currencies.
“Commodity prices are higher across the board today as the tide — weak U.S. dollar post FOMC — lifts all boats,” said Commerzbank’s Carsten Fritsch told Reuters Global Oil Forum.
Analysts said Brent had found a technical support level at the 200-day moving average. But PVM Oil Associates told investors to “treat this recovery with scepticism”.
Posted by Juliet Ekwebelam