Oil prices dip as dollar rebounds

A crude oil production field PHOTO: AFP

A crude oil production field PHOTO: AFP

Oil prices edged down slightly Tuesday but held around 11-month highs thanks to a weaker dollar and forecasts for another drop in US inventories.

The commodity has rebounded about 90 percent from near 13-year lows touched at the start of the year as worries over a global supply glut ease and output from key producers Nigeria and Canada is dented.

Expectations for a US interest rate hike this summer were all but erased by Friday’s weak jobs data, which sent the dollar tumbling — making crude cheaper for buyers using other currencies.

Attention is now on the release of US Energy Information Administration stockpiles data on Wednesday, which a survey by Bloomberg News forecast to show a sharp fall in the week to June 3.

At about 0645 GMT, US benchmark West Texas Intermediate was down one cent $49.68 a barrel while Brent was down three cents at $50.52 a barrel.

Market momentum is still strong and prices are likely to regain their position during European and US trading hours, CMC Markets trader Alex Wijaya told AFP.

“The drop we’re seeing is normal market movement because fundamentals like supply concerns are still driving prices in the oil market,” he said.

Crude has managed to push on with gains as the refusal last week by export cartel OPEC to agree output limits has been offset by attacks in Nigeria that have slashed output in the key producer by a third, while Canada’s oil region is still suffering the effects of wildfires.

But David Lennox, an analyst at Fat Prophets in Sydney, said it remained to be seen if the advances could be maintained.

“The data coming out of the US looks positive,” he told Bloomberg News. “The disruptions are doing a job, but they are only disruptions. We have to see US crude stockpiles consistently decline. Oil is probably going to hang around $50 for some time, but the risk is probably to the downside.”

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