Oil prices on Thursday extended gains from the previous session, pushed up by a weak dollar and by comments from Saudi Arabia that it would rather see an undersupplied market than end a deal with OPEC and Russia to withhold production.
US West Texas Intermediate (WTI) crude futures were at $61.02 a barrel at 0147 GMT, up 42 cents, or 0.7 per cent from their last settlement, adding to a 2.4 per cent gain in the previous session. Brent crude futures were at $64.64 per barrel, up 28 cents, or 0.4 per cent, extending Wednesday's 2.6 per cent rise.
Prices rose on the back of ongoing weakness in the US-dollar against other leading currencies, further supported by rising stock markets, traders said. A weaker greenback potentially supports consumption of dollar-denominated commodities as it makes fuel and raw materials cheaper for countries using other currencies. “On commodity markets, everyone loves a lower U.S. dollar," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
More fundamentally, oil markets got a push from comments by Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), voicing support for production cuts backed by OPEC and other producers including Russia since 2017 in an effort to tighten the market and prop up prices. “If we have to err on over-balancing the market a little bit, so be it,” Saudi Energy Minister Khalid al-Falih said on Wednesday. “I think we are going to be sticking with our policy (to withhold production) throughout 2018.”
Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, said “the Saudi signal is reasonably convincing, suggesting OPEC and their partners are committed to maintaining an absolute floor on oil prices.”
Threatening to undermine the OPEC-led effort to tighten markets is soaring production in the United States, which is not participating in the pact to cut. US crude oil production rose to a fresh record of 10.27 million barrels per day (bpd), more than top exporter Saudi Arabia pumps and within reach of top producer Russia. Consequently, US crude inventories rose by 1.8 million barrels in the week to Feb. 9, to 422.1 million barrels, the Energy Information Administration said on Wednesday.