Oil prices rise on weaker US dollar and inventory data

[LONDON] Oil prices rose Wednesday, helped by a weaker US dollar and official data revealing a smaller-than-expected increase in US crude stockpiles, analysts said.

The US dollar weakened after Federal Reserve chief Janet Yellen signalled a cautious approach to US interest rate hikes, making crude priced in the currency cheaper for holders of rival units.

An official government report meanwhile showed another rise in US commercial crude stockpiles, indicating softer demand in the world's top oil consumer, although the build came in below market expectations.

Around 1600 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May was up 32 US cents at US$38.60 a barrel.

Brent North Sea crude for May delivery gained 43 US cents to US$39.57 a barrel compared with Tuesday's close.

"US crude stocks posted another build but much smaller... than the prior week," noted DNB Bank analyst Torbjorn Kjus.

The US Department of Energy on Wednesday said that the country's commercial crude stockpiles grew by 2.3 million barrels last week, lower than the some three million expected by analysts.

Traders reacted also to the currency market where the US dollar weakened after Ms Yellen said Tuesday that interest rates were not likely to rise before June and that any move would be slow and gradual.

If the oil price "hinges on US dollar weakness, it is not going to go much higher", said Bernard Aw, a strategist at traders IG Markets.

"In the longer term, it's still a demand and supply game. It's still a supply glut issue. There's only so much the US dollar can do."

Prices have collapsed from levels above US$100 seen in mid-2014 largely owing to supply outrunning demand as global economies, particularly China, suffer a growth slowdown.

Major oil producers, led by Russia and Saudi Arabia, will meet in Doha on April 17 to discuss measures to stabilise prices, including a proposal not to pump above current output levels.

AFP