Oil Prices Surge as Dollar Weakens and US Crude Stocks Fall
By Sonali Paul
MELBOURNE (Reuters) – Oil prices rose early Wednesday, extending gains from the previous two days as the dollar fell after Federal Reserve Chair Jerome Powell sounded less hawkish on interest rates than markets expected, and when US crude oil stocks fell by surprise.
Brent crude futures were up 11 cents, or 0.1%, to $83.80 a barrel by 0119 GMT, adding to a 3.3% gain in the previous session.
U.S. West Texas Intermediate (WTI) crude oil futures rose 13 cents, or 0.2%, to $77.27 a barrel after rising 4.1% in the previous session.
The dollar index fell slightly to 103.29 in early trade, extending losses after Powell’s comments Tuesday and making oil cheaper for those holding other currencies.
With less aggressive rate hikes in the United States, the market is hopeful that the world’s largest economy and oil consumer can dodge a deeper slowdown in economic activity or even a recession and avoid a slump in oil demand.
“I think we’re in a reasonably balanced market,” said Westpac Senior Economist Justin Smirk.
“If we have stronger than expected growth from developing countries, (oil) prices will firm and OPEC will have to increase production. That is not our core view. We don’t see a big increase in demand,” he said.
In support of the market, weekly inventory data from the American Petroleum Institute industry group showed that crude inventories fell about 2.2 million barrels in the week ended February 3, according to market sources.
That went against the expectations of nine analysts polled by Reuters, who had estimated crude inventories had risen by 2.5 million barrels.
However, gasoline and distillate inventories rose more than expected, with gasoline inventories up about 5.3 million barrels and distillate inventories, which include diesel and heating oil, up about 1.1 million barrels.
The market will wait for data from the US Energy Information Administration, due at 15:30 GMT, to confirm the fall in crude inventories.
(Reporting by Sonali Paul in Melbourne; Editing by Muralikumar Anantharaman)
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