Brent, US crude rally on dollar weakness

Updated 20 March 2015
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Brent, US crude rally on dollar weakness

NEW YORK: Oil prices jumped on Friday, heading for their first positive week in three, as the dollar fell on interest-rate uncertainty, lifting demand for dollar-denominated commodities from holders of other currencies.
Benchmark Brent oil was up more than 1 percent, while US crude jumped more than 4 percent in New York morning trade, shrugging off weakness from the European session.
Traders said US crude was showing more momentum ahead of the expiration of its front-month contract.
Oil could gain further in the afternoon if US oil rig count data from private firm Baker Hughes at 1 p.m. EDT (1700 GMT) shows another sharp decline, which may point to lower production in the future. A smaller-than-expected count could undercut Friday's rally.
"The Baker Hughes numbers could certainly be pivotal to afternoon trade, but for now, all eyes are on the dollar and the euro, keeping with the stronger relationship between oil and currencies the past few days," said Joseph Posillico, senior vice president of energy futures at Jefferies in New York.
The dollar was lower on Friday on expectations, spurred by a Federal Reserve statement on Wednesday, that US interest rates will rise more slowly than expected.
The euro rose against the dollar after the leaders of Greece and Germany struck a conciliatory note over efforts to keep Greece in the euro zone.
Brent's front-month May contract was up 70 cents at $55.13 a barrel at 11:22 a.m. EDT (1522 GMT), after a session low of $53.55. The contract is set for a 1 percent gain on the week after two weeks of declines.
US crude's expiring front-month, April, rose $2.04 to a session high of $46 a barrel. The spread between April and nearby May, which will become the front-month for US crude from Monday, was at just over $1 a barrel, indicating further gains for April before Friday's settlement.
Brent's spread with US crude, one of the biggest volume trades in oil, was at around $8 a barrel, though technical analysts said it could blow out to above $30 over time.
Aside from the dollar and the oil rig count, traders were also watching intensive efforts by world powers to clinch nuclear deal with Iran. Tehran plans to raise its oil exports, now curtailed by sanctions related to its nuclear program, once it strikes a deal.
US stocks advanced on Friday. MSCI's all-country world index of equity performance in 46 countries rose 1.1 percent.
The Dow Jones Industrial Average rose 155.85 points, or 0.87 percent, to 18,114.88, the S&P 500 gained 15.72 points, or 0.75 percent, to 2,104.99 and the Nasdaq Composite added 34.80 points, or 0.7 percent, to 5,027.17.
The market may see heightened volatility heading into the close as a result of quadruple witching: The expiration of stock options, index options, index futures and single-stock futures.
The benchmark 10-year US Treasury note rose 11/32 in price, pushing the yield down to 1.9355 percent.
Both gold and silver rose for a third straight session, also helped by the dollar's weakness. Gold rose 0.9 percent while silver jumped 3.5 percent. Copper rose 2.3 percent.


Oil prices pressured by economic slowdown, but OPEC cuts support

Updated 2 min 33 sec ago
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Oil prices pressured by economic slowdown, but OPEC cuts support

  • Analysts said an economic slowdown could soon dent fuel consumption
  • OPEC has pledged to withhold around 1.2 million barrels per day of crude supply
SINGAPORE: Oil prices were on Wednesday weighed down by economic growth concerns that dampened the outlook for fuel consumption, but supported by voluntary supply cuts led by producer club OPEC and by US sanctions against Iran and Venezuela.
International Brent crude oil futures were at $67.55 a barrel at 0432 GMT, down 6 cents, or 0.1 percent, from their last close. Brent on Tuesday touched its highest since Nov. 16 at $68.20 a barrel.
US West Texas Intermediate (WTI) crude futures were at $58.92 per barrel, down 11 cents, or 0.2 percent, from their previous settlement. WTI on Tuesday reached its strongest level since Nov. 12 at $59.57 a barrel.
Analysts said an economic slowdown could soon dent fuel consumption.
“Global growth concerns and ongoing oversupply fears (are) creating headwinds for the commodity,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Asian business confidence held near three-year lows in the first quarter as a US-China trade dispute dragged on, pulling down a global economy that is already on a downward path, a Thomson Reuters/INSEAD survey found on Wednesday.
The dips come after crude prices rose by more than a quarter this year, pushed up by a pledge led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold around 1.2 million barrels per day (bpd) of supply as well as by US sanctions against oil exporters Iran and Venezuela.
“The shaky supply outlook with regard to Venezuela and Iran, as well as the petro-nations’ output restrictions are top of mind in the oil market,” said Norbert Ruecker, head of economics at Swiss bank Julius Baer.
Ruecker said oil prices were likely capped around $70 per barrel as fuel price inflation, as seen last year, would hit demand at that level.
At the same time, he said oil prices were supported above $50 per barrel as investment into US shale output growth would cease below that price.
Between those price levels, Ruecker said “the US shale boom almost fully meets global oil demand growth mirrored by the strongly expanding crude oil exports,” which hit a record 3.6 million bpd in February.
“We see ... roughly 1.2 million bpd of US shale oil growth over the coming year,” Ruecker said, which is in line with most global oil demand growth forecasts of 1 million to 1.3 million barrels per day for 2019.
The US Energy Information Administration is due to publish its weekly crude production and storage level report around 1700 GMT on Wednesday.