Oil holds above $60 as stronger dollar caps supply-driven rally

Crude has rallied more than 30 percent to start the year as output reductions by the Organization of Petroleum Exporting Countries and its partners

Oil held near a four-month high as a stronger dollar capped a rally spurred by a bigger-than-expected drain from US stockpiles.

Futures were little changed in New York, after having climbed above $60 a barrel on Wednesday for the first time since November when US government data showed that nationwide stockpiles fell by the most since July. The dollar gained, undermining investors’ appetite for crude and other commodities priced in the US currency.

“Oil stocks are getting a little bit tighter than what we’ve been used to,” said Phil Streible, senior market strategist at RJO Futures Group in Chicago. “But the dollar index is going up and weighing on oil.”

Crude has rallied more than 30 percent to start the year as output reductions by the Organization of Petroleum Exporting Countries (Opec) and its partners, as well as supply disruptions in Venezuela and Iran, countered growing American shale production. 

Still, the gains have been checked by concerns that a slowing global economy and a protracted trade dispute between the US and China will impede fuel consumption.

West Texas Intermediate oil at $60 “will present a temporary line in the sand,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “The market is completely transfixed on falling supply while ignoring the potential added stress of rising oil prices at a time where recession risks are on the rise.”

WTI for May delivery was 6 cents higher at $60.04 a barrel at 11.03 am (8.33 pm IST) on the New York Mercantile Exchange. Brent for May settlement was down 18 cents to $68.32 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a premium of $8.01 to WTI. American crude inventories declined by the most since July to 439.5 million barrels last week, while a Bloomberg survey of analysts forecast an increase of 1.75 million barrels. The country’s crude exports were near a record high, imports from Saudi Arabia fell by more than half and shipments from Venezuela stopped.