Oil climbs above USD 115/barrel on lower dollar
Oil prices edged up to above USD 115 a barrel on Wednesday, as a lower dollar rekindled buying in oil and other commodities.
US crude rose half a percent or 56 cents to USD 115.09 a barrel, while London Brent crude climbed 45 cents to USD 113.70 a barrel at 0323 GMT.
“There could be further upside, but it will not be that much because of the poor economic outlook (in the West),” said Gerard Rigby of Fuel First Consulting in Sydney.
The dollar struggled to extend its gains against the euro, which fell to a six-month low on Tuesday, as traders look beyond evidence of a euro zone growth slowdown for any signs the European Central Bank would consider cutting interest rates.
An index that measures the dollar’s performance against a basket of six major currencies was nearly flat at 76.745, slipping from a new high for the year of 77.413 hit on Tuesday.
Eyes were also on the upcoming weekly oil products data to be released by the Energy Information Administration later on Wednesday in the US.
The market expects a drawdown in gasoline stocks for the fourth-straight week as US imports fall, a Reuters poll showed.
On average, the poll called for a 900,000 barrel increase in crude stocks, recovering from a larger-than-expected drawdown the week before, while gasoline stocks were forecasted to show a three million barrel drawdown.
“If the stocks drop, I expect crude prices to rise but it will be within the USD 118-120 a barrel range. If the stocks increase, or are flat, I expect prices to be around the USD 112 113 a barrel level,” Rigby said.
Prices are unlikely to go below USD 100 a barrel in the short term because robust demand in China and India will help offset bearish sentiment in the West, he said.
Additionally, Organization of the Petroleum Exporting Countries (OPEC) member Venezuela will be proposing an oil production cut at the next OPEC meeting in September in Vienna if prices continue to fall, Energy Minister Rafael Ramirez said on Tuesday.
“That is why we won’t see prices falling below $112 a barrel,” Rigby said.
Supply threats remain
Political upheaval in producer countries and the threat of bad weather in the Gulf of Mexico would continue to underpin crude markets.
Unrest in Nigeria would cushion any dramatic fall in prices, as the deteriorating security situation in the Niger Delta has shut a fifth of its two million barrel-per-day (bpd) oil capacity.
Over in Georgia, Russia said that its troops will completely pull out from the country by Friday, but the United States said that it had yet to see any serious withdrawal, and has accused Russia of targetting civilians.