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US oil hits 5-month high as dollar weakens
[LONDON] US crude oil hit a five-month high on Thursday as the dollar slipped to its lowest since February and as more evidence emerged of a gradual balancing of the US domestic market.
The US currency slipped to a two-month low against a basket of currencies as the euro and Japanese yen rallied, making oil less expensive for holders of other currencies. "The dollar has been the big factor," said Bjarne Schieldrop, chief commodities analyst at SEB in Olso. "The dollar index broke below its 60-day moving average on Monday this week for the first time since July and it is only 1.1 per cent away from breaking below its 120-day moving average at the moment," he added.
Brent crude oil was up 25 cents at US$66.09 a barrel by 0830 GMT.
US crude oil, also known as West Texas Intermediate or WTI, hit a high of US$59.40 a barrel, its highest since Dec 12, before easing back to trade around US$59.15.
US crude was also supported by news on Wednesday of the first crude oil stock draw in almost half a year at the US futures hub at Cushing, Oklahoma.
US oil inventories have been rising steadily for months but have begun to level off in recent weeks as domestic production has eased and refinery demand has picked up, helping balance the market.
Singapore-based brokerage Phillip Futures said it expected "more range-bound movements moving forward because fundamentals have remained unchanged".
Despite prices hovering close to half-year highs, analysts warned against investment into certain oil sectors, even if prices continued to rise. "We advise investors to avoid companies that have large business exposure to jackup rigs," Nomura said on Thursday. "We believe the global jackup rig oversupply is only mid-way through the downcycle ... There are 93 uncontracted jackup rig deliveries in 2Q15-4Q16F, which are equal to 17 per cent of the global fleet at end-14. We expect this to exert further downward pressure on the current jackup rigs," it added.
Tamas Varga, oil analyst at London brokerage PVM Oil Associates, said the US oil market was strong but he thought sentiment could be about to turn after such a strong rally. "WTI structure is strengthening, but I think this is a rally to sell into," Mr Varga said.