Singapore: Oil rose more than $1 a barrel on Wednesday, within sight of Monday’s record high above $143 on forecasts that global supply will lag demand and expectations the European Central Bank will raise interest rates later this week.
U.S. crude rose $1.21 to $142.18 a barrel while London Brent crude gained $1.52 to $142.19.
The International Energy Agency cut its global oil supply capacity forecast by 2.7 million barrels per day (bpd) to 95.33 million bpd by 2012, boosting prices already lifted by tension between Iran and Israel.
Traders bought crude on the weak dollar, which softened ahead of Thursday’s European Central Bank meeting, which is widely expected to conclude an interest rate hike to deal with quickening euro zone inflation.
“The U.S. dollar is an each-way bet and will likely cause some volatility in prices,” Mark Pervan, a senior commodities analyst at the Australian & New Zealand (ANZ) Bank, said in a research note.
Oil hit a record $143.67 a barrel taking its gains for the year to nearly 50%, in part due to concerns that tension between Israel and Iran could disrupt supply from the Middle East Gulf.
Iran’s Revolutionary Guards had said it would impose controls on shipping in the Strait of Hormuz should the country be attacked. About 40% of all seaborne oil trade passes through the Strait, according to the U.S. EIA.
Adding to supply worries, OPEC President Chakib Khelil said the cartel did not have enough spare capacity to replace Iranian oil if Tehran were to cut exports due to an attack.
Traders will look out for U.S. oil inventories data and the monthly U.S. employment report due for further indications of the economic outlook for the world’s top oil consumer.
Weekly U.S. oil inventory data is expected to show a 100,000-barrel fall in crude stocks, a 200,000-fall in gasoline stocks, and a 1.9-million-barrel build in distillates.