Oil edges up on weak dollar

Oil prices edged up in early Asian trade on Friday, supported by a weaker dollar, as investors weighed rising supplies and the impact on fuel demand from the Covid-19 pandemic.

Brent crude futures for June climbed 7 cents, or0.1%, to $63.27 a barrel by 0106 GMT while U.S. West Texas Intermediate (WTI) crude for May was at $59.77 a barrel,up 17 cents, or 0.3%.

"A weaker USD and falling US bond yields helped support investors’ appetite in commodity markets," ANZ analysts said ina note.

A weaker dollar makes oil cheaper for holders of other currencies, which usually helps boost crude prices.

Both contracts are on track to post a 2%-3% drop this week after a decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, a group known as OPEC+, to gradually increase supplies by 2 million barrels per day between May and July.

However, analysts expect global oil inventories to continue to fall as fuel demand accelerates in the second half of this year as the global economic recovery gathers steam.

But concerns are surfacing that renewed lockdowns in parts of the world to curb rising Covid-19 cases and problems with vaccinations could alter the oil demand picture.

Stephen Innes, chief global markets strategist at Axi, said oil prices are expected to trade in a range between $60 and $70as investors weigh these factors.

He added that the sudden calm and drop in volatility in oil markets have attracted passive investors as prompt inter-month spreads have widened in backwardation.

In a backwardated market, as Brent is in now, front-month prices are higher than those in future months implying tighter supplies.