Oil prices rise on softer dollar, OPEC cut expectations
A motorist holds a fuel pump at a Gulf petrol station in London April 18, 2006. REUTERS/Luke MacGregor/File Photo
(Reuters) Oil prices rose in quiet trading on Thursday, supported by strong U.S. economic data, a pause in the U.S. dollar rally and optimism that crude producers would abide by an agreement to limit output.
Brent futures LCOc1 for February delivery rose by 75 cents to $55.21, or 1.3 percent, per barrel by 10:52 am ET (1552 GMT), having finished 89 cents lower on Wednesday. U.S. West Texas Intermediate crude CLc1 rose 62 cents to $53.11 a barrel.
The dollar index .DXY, which tracks the greenback against a basket of six currencies, slipped by 0.3 percent as investors took profits after its rise to a 14-year peak earlier this week.
A weaker dollar makes greenback-denominated commodities including oil cheaper for holders of other currencies.
Trading overall was quiet as desks wind down for the holidays. The front-month crude futures has seen volume of about 225,000 contracts as of 10:52 a.m. ET, less than half of the total daily average over the last 200 days, according to Thomson Reuters data.
Thursday’s gains were curbed by an unexpected rise in U.S. crude inventories last week and moves by Libya to boost output over the next few months.
New orders for U.S.-made capital goods rose more than expected in November amid strong demand for machinery and primary metals, suggesting some of the oil-related drag on manufacturing was starting to fade.
U.S. data also showed the economy grew faster than previously estimated in the third quarter, notching its quickest pace in two years.
Optimism that OPEC and non-OPEC oil producers would stick to a deal to cut output by almost 1.8 million bpd from Jan. 1 helped support prices, which have added to gains since the deal was agreed on Dec 10.
“The announcements coming from Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Iraq, and Russia are all encouraging signs that they will abide by the cut and hopefully other countries will follow suit,” OPEC member Kuwait’s oil minister Essam Abdul Mohsen Al-Marzouq told reporters.
Ric Spooner, chief market analyst at CMC Markets in Sydney, said he was also upbeat about upcoming cuts: “It is a safe assumption particularly in the early stages that OPEC and non-OPEC producers will abide by the agreement to curb output.”
On the downside for oil prices, U.S. crude stocks posted a surprise build last week, climbing by 2.3 million barrels compared with an expected decline of 2.5 million barrels, government data showed on Wednesday.
Libya’s National Oil Corporation (NOC) said it hoped to add 270,000 barrels per day (bpd) to national production after it confirmed on Tuesday that pipelines leading from the Sharara and El Feel fields had reopened. NOC said that Sharara output reached 58,000 bpd on Wednesday.