Oil extends gain from three-month high

19/03/2016 03:58 AST

Crude extended gains from a three-month high as US oil production dropped, while central-bank policies put pressure on the dollar and improved the outlook for demand growth. Futures rose as much as 2.5 per cent in New York.

Crude output fell to the lowest since November 2014, according to an Energy Information Administration report on Wednesday.

Baker Hughes data Friday may show that the number of oil rigs in the US fell from the lowest since 2009.

The Bloomberg Dollar Spot Index held near the lowest level since June after the Federal Reserve scaled back expectations for the pace of interest-rate gains.



Oil market

“The dollar has stopped falling for the moment but there’s a lot of momentum in the oil market,” said Bob Yawger, director of the futures division at Mizuho Securities USA in New York.”

The rig number today could go a long way to perpetuating the production story. If the number drops again domestic production could be just a couple weeks away from falling below 9 million barrels for the first time since 2014.”

Oil is heading for a fifth weekly gain, the longest run since May, amid speculation stronger demand and shrinking US shale oil production will ease a global glut.

The Federal Reserve signaled a slower pace of rate increases and Norway and Indonesia cut borrowing costs on Thursday, a week after the European Central Bank boosted stimulus. A weaker dollar typically bolsters the appeal to investors of commodities priced in the US currency.

Production Decline West Texas Intermediate for April delivery, which expires Monday, rose 59 cents, or 1.5 per cent, to $40.79 a barrel at 9:16 am on the New York Mercantile Exchange.

The contract climbed 4.5 per cent to $40.20 on Thursday, the highest settlement since Dec. 3.Total volume traded was 26 per cent above the 100-day average.

Prices are up 5.9 per cent this week. The more-active May future advanced 47 cents to $42.13.

Brent for May settlement increased 66 cents, or 1.6 per cent, to $42.20 a barrel on the London-based ICE Futures Europe exchange.

The contract climbed 3 per cent to $41.54 Thursday, the highest close since Dec.4.The global benchmark crude was at a 7-cent premium to May WTI.

US production dropped by 10,000 barrels a day to 9.07 million last week, according to the EIA report.

Bloomberg