Global oil markets have experienced inconsistencies as the price of Brent has not moved despite the value of dollar dropping, while US crude increased due to a short covering rally by investors.
Global benchmark Brent LCOc1 fell 3 cents to reach $64.33 a barrel, while US West Texas Intermediate crude CLc1 grew 74 cents to touch $61.34, reported Reuters.
New York-based Energy Management Institute co-president Dominick Chirichella said: “The rise we’ve seen in US crude has been more of a short covering rally rather than a return to the uptrend.”
The dollar value hit its lowest after reaching a three-year low in late January. Often, a weaker dollar boosts prices for oil.
Tortoise Energy portfolio manager Rob Thummel was quoted by Reuters as saying: “I’m surprised that (Brent) oil prices are falling today given the weaker US dollar. Currently, the direction of the dollar is having a bigger impact on oil prices than fundamentals.”
Oil prices grew on Wednesday and then early Thursday after Saudi Arabia’s Energy Minister Khalid al-Falih indicated that OPEC expects to tighten the market by restricting crude production.
PVM oil broker Tamas Varga of oil broker PVM was quoted by the news agency as saying: “Khalid al-Falih gave his strongest hint yet that exiting the current supply agreement is unlikely to be on the agenda this year.”
OPEC and other oil producers such as Russia have agreed to cut output by 1.8 million barrels per day through the end of this year. However, increasing production of US is negating OPEC’s efforts.
According to Energy Information Administration (EIA), last week US crude output touched a record 10.27 million barrels per day. Following its increased production, the US has become bigger producer than Saudi Arabia.
EIA expects US output to be around 11 million bpd later this year.