Oil Edges Down on Glut Worries, Set for Weekly Gain

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Oil Edges Down on Glut Worries, Set for Weekly Gain

West Texas Intermediate crude, the US benchmark retreated from the 2015 highs it reached yesterday on speculation that US inventories will grow further adding to the global glut but remains on track for weekly gains.

Light sweet crude for June delivery slipped $1.08 or 1.7% to $56.6 a barrel on the New York Mercantile Exchange.

The most actively traded contract advanced by $1.587 to $57.77 a barrel-The highest it has ended since December 12 2014 – on Thursday bolstered by the EIA’s weekly report that showed that US stockpiles grew slower last week.

Losses were however pared by weaknesses in the dollar against the major currencies as investors readied themselves for the major economic data coming out next week.

According to the Wall Street Journal, a weaker dollar boosts the demand of dollar denominated commodities like oil as it makes them affordable for holders of other currencies.

The contract remains on track for its sixth consecutive weekly gain- its longest winning streak since Valentine’s day- and the volumes traded were 14% above the 100 day average.

Brent for June delivery, the global benchmark, however, remained near its 2015 highs reached on Thursday after advancing by 31cents or 0.5% t0 $65.15 a barrel on the London based ICE futures Exchange boosted by the ongoing tension in the Middle East.

There were fresh reports of airstrikes on weapon depots on Yemen on Friday as Saudi Arabia and her Allies continued their bomb blitz on the country. The continued insecurity increased concern over the security of the oil output from the Middle East boosting oil prices.

“The Yemen situation triggered a J-shaped bounce — plummeting initially on reports that Saudi Arabia’s involvement in Yemen was waning before posting resurgent growth as reality dawned of continued heavy Saudi involvement,” Matthew Parry, senior oil analyst at the International Energy Agency in Paris, told Market Watch.

The rest of the second quarter of this year should, however, “see precarious headwinds for price growth as overall market fundamentals point” toward a net second-quarter surplus, he said.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com