US oil Prices rallied as the dollar headed for its steepest weekly tumble on since 2001 on uncertainty about interest rates after the Federal Reserve released a more dovish than expected statement on Friday.
Brent for May delivery, the global benchmark, snapped two consecutive weeks of weakness to advance 89 cents or 1.6% to $55.32 on the London-based ICE futures exchange. Brent was up 0.6% on the week.
Light, sweet crude oil for April delivery, the US benchmark, advanced 1.76 cents or 4% to $45.72 a barrel on the New York Mercantile Exchange at the close of trading.
This was the biggest price gain by the most actively traded US oil contract since February 12. The commodity’s prices have now gained 2% on the week bucking a 4-week losing run.
Contract expiry by the April contract helped to add onto the momentum with traders trying to narrow the difference between the existing April contract and the May contract set to become the front month starting Monday.
“In our view, today’s strength is paper market tightness, unrelated to the physical market,” Tim Evans, energy futures specialist in New York for Citi Futures, told Reuters.
Oil prices in recent days have fluctuated tracking the wild swings in currency values as investors analyze the impact of an interest rate hike on the dollar-denominated commodity.
Investors have also been closely following drilling and storage data in a bid ease the oil glut reported in recent weeks that has sent the global prices plunging this year. An easing in number of oil rigs in the US is seen as an effective measure of supply cuts in the country.
According to Oil-field services firm Baker Hughes Inc, the number of oil rigs in the US fell by 41 to 825 last week bringing the total reduction this year to about 40%.
“What we’re seeing so far is that the drop in rig counts isn’t having a serious effect on supplies,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis told the Wall Street Journal.
To contact the reporter of the story: Jonathan Millet at firstname.lastname@example.org