LM:Brent rises on weak dollar, US economic stimulus
London: Brent futures rose above $104 a barrel on Friday, supported by a sharp fall in the dollar and expectations of ongoing US economic stimulus, putting the contract on course for its biggest weekly gain since late April.
US employment data is due later and will be watched to gauge the health of the world’s biggest economy. Initial job numbers on Thursday pointed to moderate growth, but were likely not strong enough to convince the Federal Reserve to scale back the amount of cash it is pumping into the banking system.
Crude gained further support from a report showing a drawdown in US oil stocks.
Brent crude gained 43 cents to $104.03 a barrel by 0842 GMT, while US oil rose 31 cents to $95.07. Both contracts are set for their biggest weekly gain since the week ended 26 April, with the European benchmark set to rise 3.4% and its US counterpart 3.2%.
“Today the focus will naturally be on the non-farm payrolls and the numbers will be followed by a lot of comments about whether it increases or not the chance of the US Fed slowing down on its QE (quantitative easing) program,” Olivier Jakob, analyst at Petromatrix said.
For Brent, $100 is a key support level and $105 an important psychological resistance, said Tetsu Emori, a commodity fund manager with Astmax Investments in Tokyo. The trading range for US oil will be between $93 and $95 a barrel, with $98 providing the next major resistance, he said.
A drop in the US currency supported oil with the dollar index hitting three-month lows in the previous session and remaining weak in Asian trade. A soft dollar makes commodities priced in the greenback cheaper for holders of other currencies.
“In the long-term I agree that the dollar will strengthen as the Fed eventually rolls back stimulus, but for now the dollar seems overbought and we are seeing some unwinding of positions,” Emori said.
Demand outlook
The Fed’s policy-setting committee meets 18-19 June. With data ranging from manufacturing to consumer spending showing the economy hit a soft patch early in the second quarter, it is unlikely the US central bank will announce at that meeting a tapering of the $85 billion in bonds it is buying each month.
Brent was also supported by news that the Buzzard oilfield in the UK North Sea has suffered a production outage, the second in less than a week. The field’s normal production is about 200,000 barrels per day.
News of a fall in US oil inventories also supported prices, particularly the US benchmark. Crude inventories at the Cushing, Oklahoma, oil hub declined more than 1 million barrels between 31 May and 4 June, energy industry intelligence service Genscape reported. REUTERS
