Oil up on tight supply and weak dollar, Brent passes $71

Jan 27, 2018, 16:47
Oil up on tight supply and weak dollar, Brent passes $71

Hong Kong - Oil headed for a weekly increase as United States crude stockpiles dropped further and the nation's currency weakened.

The price of the commodity at $71 yesterday was last recorded in December 2014.

Oil prices, boosted by a record 10th straight weekly decline in US crude inventories spiked to a three-year high.

The U.S. Energy Information Administration said Wednesday that the amount of oil in storage in the U.S. fell by more than a million barrels to 411.6 million.

Tightening global supplies have also lifted oil, as the Organization of the Petroleum Exporting Countries and allies including Russian Federation have continued supply curbs.

For the first time since 2014, oil reached $71 a barrel on Thursday, buoyed by OPEC-led supply cuts, a record-breaking run of declines in US crude inventories and a weak USA dollar. Total volume traded was about 52 per cent above the 100-day average.

Brent crude futures were at $70.22 per barrel at 0556 GMT, down 20 cents, or 0.3 percent, from their last close.

Experience suggests OPEC normally tightens the market too much after a price slump and that spot prices and spreads will overshoot first before correcting later.

US crude oil production is expected to surpass 10 million barrels per day (bpd) in February, on the way to a record ahead of previous forecasts, according to the U.S.government's Energy Information Administration. On the supply side, USA oil production was expected to soon hit 10 million barrels per day (bpd), putting it on a par with top exporter Saudi Arabia.

The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, has dropped 1.7% this week, heading for the biggest decline since July 2016.

Oil often moves inversely to the dollar, since a weaker dollar makes the commodity cheaper for foreign buyers. Contributions of 200 words or more will be considered for publication.

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