Oil prices, on Thursday, March 16, leaped for a second day, buoyed by U.S. data showing crude inventories had dipped after rising for nine weeks and a weaker dollar after the U.S. Federal Reserve signaled it would not hike rates faster than expected.
Brent crude oil was up 38 cents at $52.19 a barrel by 1050 GMT, recovering from Tuesday’s slide to $50.25, its lowest level since Nov. 30 when the Organization of the Petroleum Exporting Countries announced plans to cut supplies.
U.S. light crude oil was up 37 cents at $49.23 a barrel, also climbing from a three-month low.
The rebound has been cautious, with investors looking for evidence that OPEC-led supply cuts will bring a sustained drawdown in stockpiles since OPEC and non-OPEC producers began cutting back output on Jan. 1.
“The dollar is weaker due to the U.S. Fed. I don’t think it is going to be enough to bring some follow-through buying to crude oil. We need something more substantial,” said Olivier Jakob of Swiss consultancy Petromatrix.
The U.S. Energy Information Administration said on Wednesday that crude oil STOCKS fell 237,000 barrels in the week to March 10, defying forecasts of a 10th weekly rise. [EIA/S]
Further support came on Wednesday from the International Energy Agency (IEA). Although global inventories rose in January, the agency said the oil market could be in deficit by 500,000 barrels per day (bpd) in the first half of 2017.
OPEC has broadly complied with its commitment to cut 1.2 million bpd in the first half of the year, but investors have been unnerved as STOCKS have kept climbing. The IEA called for patience, saying cuts would take time to feed through.
Thursday’s oil price rise seemed largely powered by a dip in the dollar, helping commodities across the board. A decline in the U.S. currency makes dollar-denominated commodities less expensive for holders of other currencies.
OPEC has said it wants to see inventories fall below the five-year average for industrialized nations. Stephen Brennock of PVM oil brokerage said this would be achieved only if OPEC kept supply reductions beyond the first half of 2017, Reuters reports.