Singapore: Oil crept up towards $71 a barrel on Thursday, supported by the weaker dollar, after sliding more than 2% to a two-month low a day earlier due to a large increase in fuel stockpiles in the US.
The US dollar retreated after this week’s recovery, with the New Zealand and Australian dollars leading demand for higher-yielding and commodities-linked currencies after much stronger than expected Australian jobs data.
Traders are also watching the bearish impact of an increase in Saudi term crude supply to two Asian buyers, despite OPEC members saying that the group would not raise production targets at its 22 December meeting.
US crude for January delivery rose 26 cents to $70.93 a barrel by 0331 GMT, after losing almost $2 for its sixth straight day of losses on Wednesday, when it hit the lowest since early October at $70.13.
London Brent crude gained 31 cents to $72.70.
“A lot of investors are getting out of the high-liquidity markets like gold and crude,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
“It’s tough for crude to go higher this month because everyone is moving to close their positions by the end of the month. But early next year, money will be coming back to the exchanges and commodities will rise gradually,” Hasegawa said.
US Energy Information Administration (EIA) data showed that distillate stocks, which include heating oil and diesel, rose last week by an unexpected 1.6 million barrels, versus forecasts for a 600,000-barrel drop, reflecting persistently poor demand in the world’s largest oil consumer during winter.
Gasoline inventories rose 2.2 million barrels, above projections of a 1.5 million-barrel build.
The 3.8 million-barrel drawdown in crude stockpiles as refiners raised production was shrugged off as the government figures lagged the 5.8-million barrel drop shown in separate industry data on Tuesday.
“Stock levels at Cushing have been rising. That is a bearish factor,” Hasegawa added.
The EIA said crude stocks at Cushing, Oklahoma, the delivery point for NYMEX crude oil futures, were up last week by 2.5 million barrels at 33.4 million barrels.
“While we are still shy of the near 35 million-barrel peak in February this year, the pressure on spreads remains and the contango in the WTI forward curve can stand to widen,” BNP Paribas said in a report.
Even as Ecuador and Kuwait echoed remarks by OPEC peers that the cartel would not raise output at its Angola meeting, Saudi Arabia increased supplies for January to at least two buyers in Asia and kept full volumes to others.
The world’s top oil exporter last month had allocated full contracted volumes for the first time in a year for December to many Asian customers.
Oil’s surge to a high for the year of $82 in October, from below $33 last December, and Thursday’s improvement was largely led by the softer US currency.
The dollar eased 0.09% against a currency basket, after touching a one-month peak in the previous session, as the New Zealand dollar was lifted by the central bank’s signal that it may start raising rates earlier than expected, while the Australian currency was boosted by strong jobs data.
The weaker greenback makes dollar-denominated commodities cheaper for holders of other units, and also lifted gold above $1,130 an ounce on Thursday after hitting its lowest in more than three weeks the previous day.