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Oil prices jump on weak US dollar, strong investor appetite
[SINGAPORE] Crude oil futures rose half a US dollar in early Asian trading on Wednesday and remained near 2016 highs on the back of strong investor sentiment and a weak US dollar, although analysts warned this month's bull-run could soon run out of steam.
International Brent crude futures were trading at US$46.26 per barrel at 0023 GMT, up 52 US cents, or 1.1 per cent, from their last settlement.
US West Texas Intermediate (WTI) crude was also up 52 US cents, or 1.2 per cent, at US$44.56 a barrel.
WTI was further lifted after the American Petroleum Institute (API) reported a drawdown of nearly 1.1 million barrels in US crude inventories last week versus a 2.4 million-barrel build expected by analysts in a Reuters poll.
Both Brent and WTI were near 2016 highs of US$46.49 and US$44.83, respectively reached the previous session.
Beyond strong investment appetite from financial traders, analysts said crude was receiving support from a falling US dollar, which has shed 5 per cent in value against a basket of other leading currencies since the beginning of the year.
A weak US dollar, in which crude is traded, makes fuel imports cheaper for countries using other currencies at home, potentially spurring demand.
"A weaker US dollar and expectations of stronger fundamentals drove crude oil prices higher. Sentiment continues to improve, with major producer BP suggesting the markets may rebalance by the end of the year," ANZ bank said on Wednesday.
But the bank warned that the steep gains seen this month might "test investors' bullish resolve this week."
With prices up by almost a quarter this month and by over two-thirds since their 2016 lows, traders with long positions at some point will be tempted to sell and lock in the profit.