Oil Buoyed by Weaker Dollar and Stronger Equities

NEW YORK, Feb 20 (Reuters) - U.S. crude hit a near two-week high in a choppy session on Tuesday amid inventory declines at a key storage hub and on expectations that top producers could extend cooperation beyond 2018, while Brent fell under pressure from a stronger dollar.

April contract West Texas Intermediate (WTI) crude futures added 0.4 percent to $61.81 per barrel, driven by Friday's gains, as trading in the USA temporarily halted on Monday for President's Day. These rallies should be selling opportunities, and I believe that eventually we will see crude oil markets succumb to the massive oversupply.

Brent crude futures were at $65.48 per barrel, down 19 cents, or 0.3 percent, from their last close.

For the past year, the Organization of the Petroleum Exporting Countries and Russian Federation - once fierce oil-market rivals - have led a coalition of 24 producers in output cuts aimed at clearing the supply glut unleashed by US shale-oil drilling.

Outside North America, Brent crude eased on the back of a dip in Asian stocks and a stronger dollar, which potentially curbs demand as it makes fuel more expensive for countries using other currencies domestically.

In any case the growing U.S. production threatens to undermine OPEC's efforts.

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Meanwhile, Asian share markets were trying to find their footing on Wednesday as a semblance of calm returned to Wall Street . The Nikkei 225 tumbled as much as 7.1 percent on Tuesday before regaining some lost ground to close 4.7 percent lower.

According to the calculations of the Energy Information Administration (EIA), weekly production of raw materials in the US rose to a historic high of 10.27 million barrels per day for the week by February 9.

"Oil got mild support from gains in Asian equity markets, but has been getting pressure from the rise in US rig count and a slight recovery in the dollar". This story should be enough to underpin prices.

The one-year inflation expectations remained at 2.7% for the third straight month, while five-year inflation expectations held at 2.5%. The VIX volatility index was up 21 percent in advance of the USA open.

The most active gold futures contract on the Comex market in NY touched a high of $1,358.60 an ounce in midday trade, up more than 2pc or almost $30 an ounce compared to Tuesday's settlement after inflation data in the United States came in higher than expectations.

Gold has gained $112 an ounce since mid-December and despite culling positions in recent weeks large-scale speculators on derivatives markets like hedge funds have almost doubled net long positions - bets that gold will be more expensive in future - since then.


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