Oil rose on Tuesday to close to $44 a barrel, its highest level so far in 2016, supported by hopes that a meeting of oil producers will agree steps to tackle a supply glut, a weak US dollar and further signs of strong demand in China.
Many members of OPEC plus outside producers are meeting in Doha, Qatar, on Sunday to discuss freezing output.
Brent crude was up by more than dollar in afternoon trading to just under $44 a barrel, having earlier in the session scaled to a high for this year of $43.58.
"The weak dollar is one important reason," said Eugen Weinberg of Commerzbank. "Also, the fact that we are above $40 and at multi-month highs is also contributing to the price increase as it is prompting some speculative buying."
Senior Iraqi oil official Falah Alamri said he was confident the Doha meeting would result in a deal to freeze output, which would signal that prices have bottomed out. Brent hit a 12-year low close to $27 in January.
A rise in vehicle sales in China, the world’s second-biggest oil consumer, and a plan by oil and gas workers in Kuwait to go on strike on Sunday in a government pay dispute, also lent support.
Oil prices have collapsed from above $100 in mid-2014 due to oversupply. The Organization of the Petroleum Exporting Countries’ decision in November 2014 to abandon its traditional role of cutting output helped deepen the decline.
Crude gained a boost last week with news of a surprise decline in US inventories from a record high. But this week’s US supply report is expected to show an increase in stocks.
The US dollar rebounded from a more than seven-month low against a basket of currencies on Tuesday, led by gains versus the safe-haven, as investors’ appetite for risk and higher-yielding assets improved with the rise in oil prices. Gains in oil also drove a rally in commodity-linked currencies such as the Australian and Canadian dollars.
– (Reuters)
