Brent above $122 on equities rally, weak dollar

By @ibtimes on

Brent crude rose above $122 a barrel on Wednesday, helped by a rebound in equities and a weaker dollar.

ICE Brent crude gained $1.62 to $122.95 a barrel by 0853 GMT. U.S. crude was up $1.43 at $109.71 a barrel.

There are external factors -- the strong equities and weaker dollar -- which are not oil-related but answer for today's gains, Commerzbank analyst Carsten Fritsch said.

European shares rose as upbeat earnings from companies including chipmaker Intel boosted appetite for riskier assets on Wednesday, driving the Australian dollar to a 29-year high versus the dollar.

The rally in equities also boosted risk appetite, lending support to commodities.

Prices are likely to remain in a range in reduced trading ahead of the Easter holiday weekend, analysts said.

I think prices will remain in a narrow range between $120-$123 a barrel and no breakout expected ahead of the Easter weekend, Fritsch added.

The dollar index, which measures the greenback against a basket of currencies, was down 0.45 percent. A weaker dollar can lift oil prices by making dollar-denominated crude less expensive for other currency holders.

Spot gold prices breached $1,500 for the first time, and silver hit a 31-year high on Wednesday, also supported by the weak dollar.

The International Energy Agency's executive director, Nobuo Tanaka, issued the latest in a series of warnings on the effect of strong oil prices on demand.

Producer group OPEC needs to boost output in June or July to douse further price rises, Tanaka said, adding that if crude prices stayed at $100 a barrel or more for the rest of 2011, the market could see demand destruction to that of 2008.

OPEC has to date declined to make a coordinated increase in supply, despite growing concerns about demand destruction as world oil prices rocketed up to 2-1/2-year highs of $127 a barrel earlier this month amid unrest in the Middle East and North Africa.

U.S. OIL DATA

Data from the American Petroleum Institute on Tuesday showed U.S. gasoline stocks fell 1.8 million barrels and distillate stocks dropped 3.4 million barrels last week in an unexpected decline, which helped ease fears over eroding demand.

Analysts surveyed by Reuters forecast gasoline stocks would fall 1.5 million barrels and distillate stocks would be unchanged.

The API numbers were rather bullish and set a good platform for the oil data out of the U.S. tonight to boost prices, said Lim.

The U.S. Energy Information Administration's weekly data is due on Wednesday at 1430 GMT.

Tension persisted in the Middle East after Yemeni police opened fire on protesters in Sanaa and Taiz on Tuesday, killing at least three people, as protesters tried to step up their campaign to end President Ali Abdullah Saleh's 32-year rule.

In Syria, forces loyal to Muammar Gaddafi renewed the bombardment of Misrata, causing several casualties, an Amnesty International researcher in the besieged Libyan city said.

(Additional reporting by Francis Kan in Singapore; editing by Jane Baird)

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