US crude was up 45 cents at $46.48 a barrel, with both contracts hitting 2016 highs.
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SINGAPORE – Crude oil prices fell in early trading on Friday as a looming rise in Middle East output may drag on the stronger markets seen in April, although falling U.S. production and a weakening dollar are still offering support.
WTI was further bolstered after the American Petroleum Institute (API) reported a draw of almost 1.1 million barrels in USA crude inventories last week versus analysts’ expectations for a 2.4 million-barrel build in a Reuters poll. The IEA forecasts global oil-demand growth to moderate to around 1.2 million barrels a day in 2016, slower than the 1.8 million-barrels-a-day expansion a year ago.
USA crude’s West Texas Intermediate futures were up 10 cents at $44.14, turning negative briefly after the EIA report.
The rally, partly driven by the 6 per cent drop in the dollar this year, has persisted despite USA crude stockpiles growing to all-time highs above 540 million barrels, according to government data on Wednesday. Traders are also nervously awaiting the release of USA stockpiles data on Wednesday. Brent and WTI have rallied more than 70 percent since hitting their respective 2016 lows in January and February.
Though the company reported a 79 per cent slide in earnings, its share price spiked sharply higher Tuesday as the results were better than anticipated in markets.
“More evidence has surfaced about structural oil supply destruction, especially in the US, while global demand continues to set new highs, led by China and USA gasoline consumption”, said Gordon Kwan, the head of regional oil and gas research at Nomura. The Federal Reserve said on Wednesday it would leave US interest rates unchanged while the Bank of Japan said on Thursday it would hold back from expanding monetary stimulus, pushing the yen higher against the dollar.
Even so, analysts said oil near or above $50 a barrel could make drilling attractive again for US shale producers, potentially creating unmanageable supplies that sparked the collapse from the $100 levels of mid-2014.
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Tyche Capital Advisors trader and portfolio manager Tariq Zahir said: “With crude inventories building and the Saudis still pumping at record levels, we feel the recent run-up has been mainly fuelled by the weakness on the dollar”.
