London: US crude turned positive on Thursday as the dollar weakened further, while ICE Brent slipped ahead of its expiry and on concerns over further global economic slowdown.
By 05:30 pm, US crude for August was up 40 cents to $98.45 a barrel, bouncing from an earlier low of $97.54.
August Brent, which expires later on Thursday, shed 22 cents to $118.56 a barrel.
Oil and most other commodities will continue to be supported by an increase in supply of the dollar and investors outside the United States can benefit from a weak greenback as an investment currency, traders said.
The dollar fell broadly as Moody’s Investors Service jolted White House debt talks on Wednesday with a warning the US may lose its top credit rating in the coming weeks, piling pressure on Washington to lift its debt ceiling.
That followed comments from Federal Reserve chairman Ben Bernanke that the US central bank was ready to ease monetary policy further in what would be a third round of so-called quantitative easing if economic growth and inflation slowed much more.
“The markets remain well supported. Bernanke’s comment on Wednesday alluding to possible QE3 will encourage people to hold commodities if they believe in a weaker dollar,” Mark Thomas, head of energy Europe with brokerage Marex Financial, said.
BP Platform Fire
Dealing in European benchmark North Sea Brent crude futures was thinner than in US crude ahead of the August contract expiry and because the credit warning dampened investor sentiment in Europe over the United States, the world’s largest economy.
The euro zone has already been hit by a spate of downgrades.
The premium on Brent crude for August versus the September contract has risen to around $1 a barrel this week, reflecting concerns over tight supply due to the shut in at a BP oil platform on top of recent production problems at key North Sea oilfields.
BP halted oil output from the Valhall field in the North Sea on Wednesday after a fire on its production platform forced the evacuation of hundreds of workers, but the company said there was no risk of oil spills.
Valhall, which has pumped oil since the 1980s and is located in 70 meters of water, has produced around 31,000 barrels of oil per day (bpd) in 2011, according to the Norwegian Petroleum Directorate’s website.
Late in June, the August Brent contract was at the discount to September following the announcement by the International Energy Agency (IEA) to release 60 million barrels of crude oil and oil products into the market.