Oil prices up as weak dollar offsets supply concerns

Diminishing hopes of a near-term deal by major petroleum producers to cut output also affected prices

Crude prices rose today as a weaker US dollar offset concerns over a global supply glut and diminishing hopes of a near-term deal by major petroleum producers to cut output.

At around 0350 GMT, US benchmark West Texas Intermediate for delivery in March was 16 cents, or 0.5%, higher at $31.88, while Brent crude for April was 15 cents, or 0.44%, higher at $34.61.

Shailaja Nair, from energy information provider Platts in Singapore, said that crude prices have received support from the flagging dollar.

"The dollar will always have an add-on effect on crude oil prices... The volatility in the dollar and the volatility in crude have been like a constant for the past two to three weeks now," Nair said.

Oil is traded in dollars and a softening of the US currency makes crude cheaper for holders of other units, increasing demand for the commodity.

She added that the upcoming Lunar New Year holiday weekend has also contributed to a lull in the market, but the price rise is unlikely to last should market fundamentals remain the same.

"The demand is not growing... The glut will only go if the production is cut and we have seen no indications of that," Nair said.

Despite speculation of a potential deal by producers to cut output, analysts say that such a deal must involve the market's major players.

"With the absence of large producers like Saudi Arabia and Iran, I don't see much of a point in the other OPEC members trimming output. Any gaps will be quickly filled by other producers to increase market share," Bernard Aw, a market strategist with IG Markets, said. 

A price rebound last week driven by talk of possible coordination between Russia and OPEC to slash production petered out after traders brushed aside speculation.