Singapore: Oil rose above $88 on Friday, supported by a weaker dollar and cold weather in the United States and Europe.
US crude for January, which expires on Monday, edged up 56 cents to stand at $88.26 a barrel by 0441 GMT, rebounding from Thursday’s tumble of more than 1%.
“The currency factor is quite important right now for the oil market. People are looking to the foreign exchange markets and the euro is pushing down the dollar,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
The dollar index slipped 0.46% to 79.82, remaining well below its two-month high of 81.44 set in late November.
The dollar’s failure to push through the top of the trading ranges against the euro and yen has left the market in consolidation mode as operations wind down for the end of the year.
Oil and dollar-denominated commodities often move inversely to the dollar. A weaker dollar typically lifts oil prices as it lowers the value of greenbacks paid to producers while making it less expensive for oil consumers using other currencies.
Crude prices also found support from unusually cold weather in the United States and Europe.
US heating oil futures nudged higher to 2.4843, up 0.32% from Thursday’s close.
The US Northeast, the top heating oil market, was on track to have the ninth coldest December since 1950. Temperatures were expected to warm up slightly in the next two weeks.
The cold snap helped drive US oil prices to a two-year high of $90.76 on 7 December but the market has since trended lower, dropping below $87 earlier this week.
Technicals showed that crude was set to fall to $85.41 next week, which would be the lowest since 1 December.
In London, ICE Brent for February rose 48 cents to $92.08.
Brent’s premium against US benchmark West Texas Intermediate rose to a fresh seven-month high at $4.01 on Thursday, the highest since 14 May. The spread narrowed to $3.10 on Friday.
The premium has risen as stocks at the US-traded oil delivery hub in Cushing, Oklahoma, rose nearly 1 million barrels last week, extending increases to a fifth week.