Oil rose towards $69 a barrel today, snapping two days of falls, on a weaker US dollar and ahead of weekly stocks data forecast to show a fall in US crude inventories.
The dollar took a breather today after rallying in the wake of last week's US jobs data, which stirred talk that the Federal Reserve may raise interest rates later this year.
US light crude for July delivery rose 52 cents to $68.61 a barrel by 3.06am, having settled 35 cents lower yesterday at $68.09, more than $2 below a seven-month high above $70 touched on Friday.
London Brent crude was up 52 cents at $68.40. “The currency market has been driving the oil market since the middle of May. Traders are looking more at the dollar than at equity markets now,” said Tetsu Emori, fund manager at Tokyo-based Astmax.
“It is quite difficult to take positions above $70 for now. It is too risky,” he added.
Oil prices have more than doubled since the lows of this winter, tracking stronger equities markets, with the S&P 500 index rallying 39 per cent since sliding to a 1-year closing low on March 9th.
Hopes for a global economic recovery have also sustained the current price rally, and the world's top oil forecasters are likely to paint a slightly more bullish outlook in their monthly market reports this week, suggesting oil demand could bottom out and inventories start falling in the next few months.
Nobuo Tanaka, executive director of the International Energy Agency (IEA), adviser to 28 industrialised countries, told Reuters yesterday the agency expects oil stocks in the developed OECD economies to fall to 57 days by year-end from the current 63 days, if OPEC's output continues at current levels and demand recovers.
More market direction could emerge later today as industry group the American Petroleum Institute releases its weekly US inventory data at 8.30pm (Irish time), to be followed by US Energy Information Administration data tomorrow.
Analysts polled by Reuters said they expect crude stocks to have fallen by 400,000 barrels last week, while distillate and gasoline stocks could have risen by 1.2 and 1.3 million barrels respectively.
Reuters