Oil prices are rising on the weaker dollar, which is likely to cause US stocks to decline


© Reuters. FILE PHOTO: A general view of a refinery in Hobbs

By Jessica Jaganathan

SINGAPORE (Reuters) – Oil prices spiked Tuesday as a weaker US dollar supported commodities and on expectations that crude oil inventories would decline in the US, the world’s largest oil consumer, although rising coronavirus cases in Asia capped profits.

Futures for delivery in June rose 29 cents, or 0.4%, to $ 67.33 a barrel at 0157 GMT.

US West Texas Intermediate (WTI) crude oil futures for May delivery, which expire Tuesday, rose 19 cents, or 0.3%, to 63.57 barrels. The more active June contract was $ 63.71, up 0.4%, or 28 cents.

Buyers using other currencies pay less for dollar-denominated oil as the greenback weakens.

“The weakness of the US dollar continues to provide support for the commodity complex … despite concerns about oil demand in certain regions,” ING Economics said in a note.

The price fell to a six-week low against other major currencies on Monday after US Treasury yields fell last week, and stayed near the 91.055 low on Tuesday.

Supportive prices, oil and distillate stocks are also likely to have declined last week, while gasoline stocks likely rose, a preliminary Reuters poll revealed on Monday.

The poll was conducted on Wednesday ahead of reports from the American Petroleum Institute (API) industry group due Tuesday and the Energy Information Administration (EIA), the statistical arm of the US Department of Energy.

Libyan National Oil Corp (NOC) on Monday declared force majeure on exports from Hariga port, saying it could expand the measure to other facilities due to a budget dispute with the country’s central bank.

The disruption could cut Libyan oil production by 280,000 barrels per day (bpd) and bring production below 1 million bpd for the first time since October, ING said.

Saudi Arabia’s crude oil exports fell to their lowest level in eight months in February, the Joint Organizations Data Initiative (JODI) announced on Monday. This shows the commitment of the world’s largest oil exporter to a voluntary production cap to support oil prices.

However, the rising COVID-19 cases in India, the world’s third largest oil importer and consumer, dampened optimism for a sustained recovery in global fuel demand.

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Steven Gregory