BackOil rallies but US supply may temper gains
Brent crude oil futures gain 76 cents to trade at $52.09 a barrel
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London: Oil prices headed for their largest weekly rise in six weeks on Thursday, although an unexpectedly large increase in US inventories may temper some of the optimism among investors that global demand and supply could soon be in balance.
US crude stocks rose by 3.1 million barrels to 461 million last week as refineries cut output and idled capacity. Analysts had expected a rise of 2.2 million barrels.
Brent crude oil futures gained 76 cents on the day to trade at $52.09 a barrel by 1410 GMT, just shy of Wednesday’s one-month high at $53.15. US crude futures rose 57 cents to $48.38 a barrel.
Brent is set for gains of more than 8% this week, its largest weekly increase since late August and the second-largest since early 2009, after oil industry executives warned that this year’s fall below $50 would force higher-cost producers to reduce output.
“There was a hiccup with the US data this week, but production is still expected to continue to slow," Saxo Bank commodities strategist Ole Hansen said.
“The rebalancing process has started, but the question is obviously the pace of it and I think that’s where the problem of the market is - it may be getting a little too excited ... on that basis, we are at the higher end of its current range."
Underpinning the crude complex was a drop in the dollar ahead of the release of the minutes of the Federal Reserve’s most recent policy meeting, which may offer some insight into the outlook for US interest rates.
A weaker dollar tends to make it cheaper for non-US investors to buy dollar-denominated assets.
The Fed opted not to raise interest rates at its last meetings. The minutes will give investors a clue as to how concerned its policy-setters are about slowing growth in some of the world’s fastest-growing emerging economies.
Stumbling growth in the likes of China, Brazil or Russia might deter the Fed from raising rates, thereby boosting the dollar, but could undermine oil demand.
“We continue to view the oil market as oversupplied and with low prices required to achieve the sufficient rebalancing in 2016," Goldman Sachs analysts said in a note.
“And if the Fed’s potential dovish shift has been one of the catalysts for the rebound in prices, we view this in fact as a bearish development as weaker activity in the US and in (emerging) economies leaves risk to our demand forecast skewed to the downside," the bank said. Reuters
Addtional reporting by Aaron Sheldrick in Tokyo.
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