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US oil production is expected to hit 10 million bpd soon.
US oil production is expected to hit 10 million bpd soon.

Brent, WTI Prices Boosted by Weaker Dollar

Brent, WTI Prices Boosted by Weaker Dollar

The oil rally paused for breath on Friday after hitting fresh three-year highs in the previous session, but weakness in the dollar continued to underpin prices.
Brent crude futures stood at $70.49 per barrel, 7 cents above their last close. On Thursday, the contract climbed to as high as $71.28 per barrel, its highest since 2014, CNBC reported.
US West Texas Intermediate crude futures were at $65.66 a barrel, up 15 cents from their previous close, recovering from a session-low of $64.91 a barrel. On Thursday, they also reached their highest since December 2014, at $66.66 per barrel.
Both contracts were set for weekly gains after support from a weakening dollar, which on Friday hit new three-year lows against a basket of other leading currencies.
 “For as long as the US dollar remains on the defensive, no more pronounced price fall on the oil market is likely to ensue,” Commerzbank analyst Carsten Fritsch said in a note.
As oil is traded in dollars, swings in the greenback can impact oil demand as they affect the price of fuel purchases for countries using other currencies.
Still, crude prices were capped by seasonally weakening demand. Georgi Slavov, the head of research at commodities brokerage Marex Spectron, said despite a generally healthy outlook, there were short-term oil demand headwinds due to the coming end of winter in the northern hemisphere.
Many refiners shut down after winter for maintenance, resulting in lower orders for crude, their most important feedstock.
“Demand is starting to weaken as ... refining capacity was taken out of the market,” Slavov said.
This is reflecting in oil inventories. US bank Morgan Stanley noted that global oil stocks built up overall in the week ending Jan. 19.
On the supply side, US oil production is expected to hit 10 million bpd soon, putting it on a par with top exporter Saudi Arabia.
Output has grown by more than 17% since mid-2016. Only Russia produces more, averaging 10.98 million bpd in 2017.
Rising US output threatens to undermine the supply restraint led by the Organization of Petroleum Exporting Countries and Russia, aimed at propping up prices.
The cuts, coupled with demand growth, have contributed to a near 60% rise in oil prices since mid-2017, as excess crude inventories have been drawn down.

 

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