Oil rises on weak dollar, but rising U.S. supplies limit gains

Oil rises on weak dollar, but rising U.S. supplies limit gains
Thursday, January 12, 2017 - 08:57

Investing.com - Oil prices edged higher on Thursday, on a broadly weaker U.S. dollar, but gains were limited after data showed a stronger-than-expected increase in U.S. crude and distillate fuel stocks.

Crude oil for February delivery on the New York Mercantile Exchange added 25 cents, or around 0.5%, to $52.50 a barrel by 3:55AM ET (08:55GMT). U.S. crude prices jumped $1.43, or 2.8%, a day earlier.

Elsewhere, Brent oil for March delivery on the ICE Futures Exchange in London tacked on 44 cents, or 0.8%, to $55.54 a barrel, after rallying $1.46, or 2.7%, on Wednesday.

The greenback sank after U.S. President-elect Donald Trump failed to offer details on his promises to boost fiscal spending and cut taxes at his first post-election press conference on Wednesday.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell to a one-month low of 100.80 in early trade.

It was last down 0.8% at 100.89, pulling further away from last week's 14-year high of 103.82.

Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.

Gains were held in check after the U.S. Energy Information Administration said in its weekly report Wednesday that crude oil inventories rose by 4.1 million barrels in the week ended January 6. Market analysts' expected a crude-stock gain of 1.2 million barrels.

Total U.S. crude oil inventories stood at 483.1 million barrels, which the EIA considered to be at the upper limit of the average range for this time of year.

The report also showed that gasoline inventories increased by 5.0 million barrels, compared to expectations for a gain of 1.7 million barrels. For distillate inventories including diesel, the EIA reported a gain of 8.4 million barrels.

Meanwhile, market players continued to look for signs that major oil producers are adhering to planned output cuts.

January 1 marked the official start of the deal agreed by OPEC and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day.

The deal, if carried out as planned, should reduce global supply by about 2%.

However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects.

Elsewhere on Nymex, gasoline futures for February ticked up 0.6 cents, or 0.4% to $1.605 a gallon, while February heating oil tacked on 1.1 cents, or 0.7%, to $1.663 a gallon.

Natural gas futures for February delivery jumped 10.5 cents, or 3.3%, to $3.328 per million British thermal units.

Market participants looked ahead to weekly storage data due at 10:30ET (15:30GMT), which is expected to show a draw of 144 billion cubic feet in the week ended January 6.

That compares with a withdrawal of 49 billion cubic feet in the preceding week, 168 billion a year earlier and a five-year average drop of 167 billion cubic feet.

© Reuters.

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