Oil prices get a boost as dollar weakens
Published: Apr 26, 2016 6:40 a.m. ET – by Jenny W. Hsu
Oil prices rose in volatile trade on Tuesday on a weaker U.S. dollar but concerns about persistent market oversupply are expected to put a cap on gains.
Brent crude LCOM6, +1.75% , the global oil benchmark, rose 0.8% to $44.84 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLM6, +1.45% were trading up 0.8% at $42.98 a barrel. Both benchmarks were trading negative earlier in the session.
Oil was propped up by the dollar, which fell ahead of a meeting of Federal Reserve officials on Wednesday.
The Wall Street Journal Dollar Index BUXX, -0.50% , which tracks the greenback against a basket of other currencies, fell 0.2% on Monday. As oil is priced in dollars, it becomes cheaper for holders of other currencies as the greenback falls.
Still, there are few signs that the fundamental picture on the market is improving, analysts say.
“Although oil has shown more bullishness in the last six months, the supply glut is still dire. We might see a sharp correction in the market soon,” said Avtar Sandu, commodities manager at Phillip Futures.
In the U.S., Genscape, private information provider, released a weekly report showing oil inventories in Cushing, Okla., the main delivery hub in the U.S., rose by about 1.5 million barrels. The U.S. Energy Information Administration will release its official inventory data on Wednesday.
Investors have been focusing on data out of the U.S. as a bellwether for the global market balance. U.S. output has been slowly declining in recent months, and is set to fall further as low prices hit drilling activity.
“If the medium to long-term prices are set to be driven by U.S. supply considerations then the same can be said about short-term price movements,” said Tamas Varga, oil analyst at PVM.
Meanwhile, a government that controls Libya’s eastern half said its oil company has loaded its first shipment of oil over the objections of the North African nation’s internationally recognized oil company. The 650,000 barrels of crude shipment left Libya on Monday and is now sailing toward Malta. Oil exports from Libya have been erratic since the fall of Moammar Gadhafi in 2011.
According to brokerage Marex Spectron, the short-term supply of crude oil likely to increase over the next 10 days. However, the strength in demand combined with some support from key macroeconomic indicators will support the bullish market sentiment, Marex Spectron said.
“Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year,” BP PLC’s chief executive Bob Dudley said Tuesday.
Still, the energy giant reported a second consecutive quarterly loss, hurt by weak oil prices and a $917 million pretax charge relating to the Deepwater Horizon explosion in 2010.
Nymex reformulated gasoline blendstock RBK6, +2.54% — the benchmark gasoline contract — rose 0.6% to $1.54 a gallon.