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09 December 2023

Oil rises above $72 on weaker dollar, buying

US crude oil inventories rose last week by 1.2 million barrels. (GETTY IMAGES)

By Reuters

Oil rose towards $73 a barrel yesterday due to a weaker US dollar and robust buying interest as investors looked for bargains following last week's price slide to near two-month lows.

The US dollar fell from a recent eight-and-a-half-month high against the euro, on market speculation that a bailout would soon be organised for Greece.

Oil tends to rise when the dollar falls as it makes it cheaper for non-dollar buyers. Weakness in the dollar also encourages investors to move into more tangible investments such as commodities. US crude prices for March delivery rose 91 cents to $72.80 a barrel by 1257 GMT after earlier rising more than $1 to top $73. At the end of last week, prices briefly dipped below $70 a barrel to the lowest level since mid-December.

ICE Brent crude rose 96 cents to $71.07 by the same time, after hitting a high of $71.29 a barrel.

"After a very sharp sell off at the end of last week, it's making a tentative recovery. The dollar is helping and it's cold in the United States," said oil trader Christopher Bellew at Bache Financial.

He added that signs the volume of oil stored at sea was falling lent additional support. The amount of crude oil held at sea fell by around 15 million barrels to 25.65 million at the end of January versus December, according to shipbroker SSY.

Oil prices have fallen by around 10 per cent so far this year, dragged down by lacklustre demand in the world's largest oil consumer the United States and concerns about Asian demand if China further tightens its monetary policy.

But oil analysts said that prices may stabilise near current levels as technical support levels on US crude and the $70 a barrel psychological level prevent further falls.

"WTI [US crude] is in front of the key support of the 200-day moving average but for that support to hold it will require greater stability in financial markets," said Petromatrix analyst Olivier Jakob.

Investors are awaiting the outcome of a special economic summit of European Union leaders in Brussels on February 11, as the bloc grapples with a debt crisis in Greece and budget concerns in other states. Traders look to equity markets for signs of a broader economic recovery, which could revive flagging oil demand in developed countries. European equities edged higher in early trade yesterday.

The market will later look to the release of the weekly US oil inventory data from the American Petroleum Institute due at 2130 GMT for clues about the pace of fuel demand recovery.

US crude oil inventories rose last week by 1.2 million barrels and distillates fell 1.7 million barrels, a preliminary Reuters poll of nine analysts showed.

Snowy conditions in the key US northeast coast are expected to boost demand for heating oil by 11.5 per cent above normal this week, the National Weather Service said on Monday.

Geopolitical tensions over Iran's nuclear programme could also underpin oil prices.


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