Crude futures advanced on increased expectations of a drop in US production, weakness in the dollar against other major currencies and continued tensions in the Middle East.
Light Sweet Crude for may delivery opened 72 cents higher but has since advanced more than $1.57 or 3,01% to $53.45 on the New York Mercantile Exchange.
Brent futures, the global benchmark, most recently gained 94 cents or 1.66% to $58.96 a barrel on the London-based ICE futures exchange.
The dollar slipped against other major currencies on weaker than forecast retail sales and small business optimism data in March.
According to Reuters, a weaker dollar facilitates an increase in demand as holders of foreign currencies can now afford dollar denominated commodities like oil.
Monthly data from the State of North Dakota showed that crude production declined by more than 15000 barrels a day in February from a month earlier.
The lower production was in spite of the number of wells in the state hitting an all time high.
The North Dakota report came just a day after the Energy Information Administration forecast that US shale production would fall by 45000 barrels per day to just about 4.98 million barrels per day in May- the first monthly decline in four years.
Shale production in the US has helped raise the country’s output by more than 4 million barrels per day in the last five years causing the halving of prices since June.
”We believe that U.S. shale oil output is already falling, and that current rig counts imply that the month-on-month decline will exceed 70,000 barrels a day by June,” Paul Horsnell, head of commodities research at Standard Chartered, told the Wall Street Journal.
”Compared to the current oversupply of up to two million barrels per day…this would be but a drop in the ocean,” he added.
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