Weakened Dollar, Drop in US Inventories Lift Oil Prices
By Adedapo Adesanya
Oil futures rose to their highest levels in five months on Wednesday after a large decline in the United States crude inventories and a weak dollar supported prices.
The Brent crude was up by 79 cents or 1.78 per cent at $45.17 per barrel, while the US West Texas Intermediate oil gained 50 cents or 1.2 per cent to sell at $42.20 per barrel.
Both futures rose by almost four per cent in the day but mounting coronavirus infections had investors worried at a point about the demand outlook, cutting down gains.
The market had reacted positively when data showed that crude inventories in the US fell by 7.4 million barrels last week. The Energy Information Administration (EIA) data showed that drops exceeded the expected draw of 3 million barrels.
Support also came for the oil market as investors latched unto a weaker dollar, whose index fell 0.3 per cent against its rivals, making oil cheaper for holders of foreign currencies.
Oil also drew support from signs that talks between the White House and Democrats in Congress on a new coronavirus relief package are making progress, although the sides remain far apart.
White House negotiators vowed to work around the clock with congressional Democrats to try to reach a deal on coronavirus relief by the end of this week.
Even with these pointers, the market still worries about demand as coronavirus cases continue to rise as economies emerged from their lockdowns in the hope that this would go hand in hand with an improvement in oil demand.
Now, as the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ begin to raise its production, the economic outlook is still uncertain as it appears that a rise in supply will coincide with an uneven recovery in oil demand.
Global coronavirus deaths surpassed 700,000 on Wednesday with the United States, Brazil, India and Mexico leading, adding to worries of a continued slowdown of the recovery, meaning a global return to 2019 levels this year is increasingly in doubt.