Oil prices edged up on a weaker dollar, but crude continued to be weighed down by surging U.S. production and uncertainty over whether an OPEC-led supply cut is big enough to re-balance the market.
Prices for front-month Brent crude futures, the international benchmark for oil, had risen 15 cents from their last close to $50.90 per barrel.
In the United States, West Texas Intermediate (WTI) crude futures were up 19 cents at $47.92 a barrel.
The greenback has lost 2.9 percent in value against a basket of other leading currencies since its March peak on doubts over U.S. President Donald Trump’s policy making abilities.
When the dollar weakens, many futures traders pull out money from foreign exchange markets and put it into commodities futures like gold or crude futures instead.
A weaker dollar also makes oil imports cheaper for countries using other currencies, potentially spurring demand.
While there was some support for crude from financial markets, physical fundamentals remained weak, especially due to soaring U.S. output that is undermining efforts lead by Organization of the Petroleum Exporting Countries (OPEC) to cut production in order to rein in a global fuel supply overhang and prop up prices.
OPEC Research analyst forecast U.S. crude oil production to reach a multi-decade high by December, within sights of the all-time high reached in 1970.
U.S. crude oil production has already risen 8.3 percent since mid-2016 to 9.13 million barrels per day (bpd). Output briefly reached 9.7 million bpd in April 2015, it highest since May 1971.
Soaring output and brimming inventories have made U.S. WTI crude much cheaper than its international peer, Brent, which is receiving support above $50 per barrel by the OPEC-led production cut.
As a result, record amounts of U.S. crude oil have found their way to Asia and other destinations this year, and more is expected to be shipped out as traders take advantage of arbitrage opportunities by sending out excess U.S. crude into regions where it can find buyers.
Price had been moving sideways since I updated my post last week, I’ll update this post once I see a clear direction of trend.