Oil above $124 as weak dollar supports

By @ibtimes on

Brent crude oil edged above $124 a barrel Wednesday as support from a weaker dollar, ahead of a Federal Reserve statement expected to maintain loose monetary policy, countered rising U.S. inventories.

The dollar slid to a three-year low as investors bet that the Fed, after a meeting that ends Wednesday, would keep an easy policy. The fall helped support dollar-denominated oil, which has attracted investment as a hedge against inflation.

Brent crude for June rose 52 cents to $124.66 a barrel by 1308 GMT. Tuesday, it gained 48 cents to settle at $124.14 a barrel, having bounced off a $122.78 low.

U.S. crude was up 30 cents to $112.51.

It had been fairly quiet before Easter, but it looks like the market is resuming its upward march, said Christopher Bellew, a broker at Bache Commodities. Dollar weakness, and continuing trouble around the world, is supporting the market.

Violence in the Middle East has spilled over to Syria and Yemen. Italian oil and gas group Eni, reporting earnings on Wednesday, said production fell almost 9 percent in the first quarter because of unrest in Libya.

Lending support to Brent, BP said the North Sea's Forties pipeline may have to be shut for a few days later this year due to the discovery of an unexploded German mine from World War Two.

Forties usually sets the dated Brent physical crude benchmark, which forms part of the underlying market for Brent futures.

U.S. INVENTORIES

Before the Fed's decision at 1630 GMT, investors will be watching out for the latest snapshot of U.S. fuel supplies.

A weekly report from the U.S. Energy Information Administration at 10:30 a.m. EDT is expected to show crude stocks rising by 800,000 barrels -- much less than the increase reported by the API Tuesday.

Gasoline stocks are expected to fall 1.1 million barrels, while distillates are forecast to increase by 100,000 barrels.

Tuesday, the American Petroleum Institute (API) said U.S. crude stocks jumped 4.9 million barrels last week as imports increased.

U.S. crude has risen 23 percent so far this year and consumers in the world's largest economy are starting to show signs of being hurt by higher fuel costs.

President Obama Tuesday urged producers to lift crude output as he sought to deflect public anger over high gasoline prices. U.S. motor fuel prices have become a heated political issue after pushing toward $4 a gallon.

Obama's appeal followed comments from top oil exporter Saudi Arabia earlier in the day that it was not comfortable with high oil prices and a strike last week by truckers in China protesting over higher fuel costs.

(Additional reporting by Manash Goswami in Singapore; editing by Jason Neely and Jane Baird)

Join the Discussion