Brent crude futures rose toward $66 Tuesday, lifted by a weaker dollar and the Yemen conflict, but concerns of oversupply weighed on prices amid news of record high output from Saudi Arabia in April and Iraqi plans for record exports in June.
June Brent crude was up 88 cents at $65.79 a barrel by 1352 GMT (9.52 a.m. EDT), easing back from an intraday high of $66.45 a barrel.
June West Texas Intermediate (WTI) rose 58 cents to $59.83 a barrel, after touching $60.55 a barrel earlier in the day.
The dollar was down 0.6 percent against a basket of currencies. Dollar-traded commodities such as oil benefit from a weaker U.S. unit as it makes them cheaper for holders of other currencies.
“We had a strong recovery of the U.S. dollar in the last few trading sessions but we saw a reverse this morning,” said Myrto Sokou, a senior analyst at Sucden Financial. “The weaker dollar is providing support for prices.”
Top global oil exporter Saudi Arabia raised its crude production in April to a record high, feeding its flourishing Asian market share and its own power plants and refineries.
The world’s top oil exporter pumped 10.308 million barrels of oil per day in April, a Gulf industry source told Reuters on Tuesday, compared to 10.29 million bpd in March.
Iraq plans to export a record volume of crude oil from its southern ports in June, trade sources familiar with the matter said on Tuesday.
“I think that the global surplus story is still going to persist and that’s going to keep a cap on oil prices,” said Michael Hewson, chief markets analyst at CMC Markets.
Saudi-led air strikes on a rocket base in the Yemeni capital Sanaa on Monday killed 90 people and wounded 300, a local official was quoted as telling the state news agency Saba. Saudi Arabia has led a bombing campaign against Iran-allied Houthi rebel forces in Yemen since March 26.
A five-day truce was due to begin between the two sides on Tuesday evening.
While Yemen is a marginal oil producer, its proximity to shipping lanes has raised concerns over supply routes.
Brent dropped to a six-year low of $45.19 in January before recovering to a 2015 high of $69.63 last week. But analysts warned the recovery may be short-lived as oil supplies continue to increase.
Goldman Sachs said in a note the price rally itself prevented a reduction of oversupply and would therefore lead to lower prices going forward.
“While low prices precipitated the market rebalancing, we view the recent rally as premature with crude oil prices expensive relative to current and forecast fundamentals,” the U.S. investment bank said.
Source: Reuters
