Oil prices rise on weaker dollar ahead of Fed rate decision

A weak dollar provided support as it makes crude cheaper for customers using other currencies

Oil prices extended gains in Asia today as traders await a report on US stockpiles, while analysts said the worst of a sell-off that in the beleaguered commodity has likely passed.

The two main contracts -- West Texas Intermediate (WTI) and Brent -- soared Tuesday, boosted by speculation that Saudi Arabia is planning to cut back drilling, fuelling hopes of an easing to the global supply glut.

A weak dollar has also provided support as it makes crude cheaper for customers using other currencies.

At around 0340 GMT, US benchmark West Texas Intermediate (WTI) for delivery in June was up 42 cents, or 0.95%, at $44.46 and Brent crude for June rose 48 cents, or 1.05%, to $46.22.

"Market sentiment continues to improve," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "A lot of people are convinced that the bottom has been reached, and the market will rebalance later this year."

However, Platts Associate Editorial Director Shailaja Nair said she "would still be cautious against the sustainability of this rise because the world is still awash with oil".

From mid-2014 crude plunged more than 70% to near 13-year lows at the start of the year owing to a supply glut, overproduction, weak demand and a slowdown in the global economy.

But while talks between producer majors to address the crisis collapsed on April 17, signs of a pick-up in China's economy and a strong US recovery have helped prices rise to year-to-date highs.

Traders will be keenly watching the release of an energy department report on US supplies later Wednesday. On Tuesday the American Petroleum Institute reported a surprise drop in stockpiles, according to Bloomberg News.

The Federal Reserve will conclude a much-anticipated policy meeting later Wednesday, which will be closely followed for clues about the state of the US economy and the bank's timetable for hiking interest rates.