Oil Prices on Track for Fifth Day of Gains

By Alison Sider, Christopher Alessi and Jenny W. Hsu Features Dow Jones Newswires

Oil prices ticked higher Friday, on track for a fifth day of gains, as the U.S. dollar weakened and investors focused on signs of an easing supply overhang.

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U.S. crude futures recently rose 27 cents, or 0.59%, to $46.35 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 29 cents, or 0.6%, to $48.71 on ICE Futures Europe.

The dollar tumbled on Friday after U.S. data showed that inflation was flat in June from the prior month. The figures were the latest sign that U.S. inflation remains soft, which could be an obstacle for the Federal Reserve's plans to raise interest rates. The WSJ Dollar Index slid 0.6%, to 87.42.

A weaker dollar makes dollar-traded oil cheaper for foreign buyers, often causing oil futures to rise.

The dollar has taken a back seat to concerns about a global oil glut in recent months, but analysts said the dollar's fall Friday helped lift oil prices.

"If the dollar continues to weaken, it's pretty bullish for oil," said Bill O'Grady, chief market strategist at Confluence Investment Management. "The focus has been on [the Organization of the Petroleum Exporting Countries] and inventories -- that's perfectly legitimate. But we will occasionally see these periods where it's all about the dollar -- we may be heading into one of those."

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Oil prices have been climbing in recent days as investors have been encouraged by recent data showing large weekly declines in U.S. oil stockpiles. Price rose again Thursday after the International Energy Agency said demand is accelerating.

The rally hasn't put oil anywhere near the $60 mark that many had predicted it would be on its way to by now, but it does show that investors may believe the 11-month lows the market hit at $42.53 in June are about the bottom.

But many investors remain more focused on the continuing global glut, analysts say, and this should continue to hold back prices. In its report, the IEA also noted that OPEC members are slipping in their compliance with an agreement to curtail output.

The market is only "a little bit more balanced," said Tom Pugh, a commodities economist at Capital Economics. "We have gone from extremely bearish to quite bearish," he added.

OPEC crude output hit its highest level in 2017 at 32.6 million barrels a day, driven by Libya, Nigeria and Saudi Arabia, the IEA said, complicating the cartel's efforts to curb production.

OPEC last year teamed up with 10 other big producers outside the cartel -- including Russia -- to cut production through March by roughly 1.8 million barrels a day from the record levels reached last October.

There is a "growing consensus that there is no strong element of support to drive prices higher over the next year," analysts at JCB Energy wrote in a note Friday.

The IEA's more robust demand outlook is supported by China's endless thirst for foreign crude. In the first half of 2017, it imported an average 8.6 million barrels a day, 18% more than the start of last year. The country has become the world's leading energy importer, followed by the U.S.

China market watchers say the uptrend should persist as the government aims to expand its strategic petroleum reserve.

"It is hard to draw a conclusion that the bull market is back, but recent trends suggests the market is tightening -- even though at a slower pace than previously thought," said Grace Liu, the head of petrochemical research at Guotai Junan.

A potential market mover later Friday will be the weekly U.S. rig-count data from Baker Hughes. The report is widely used to gauge future U.S. production.

There is a growing view that even though U.S. output could hit 10 million barrels a day by 2018, room for growth is limited and production will soon peak, said Li Li, the head of research at ICIS China. Unless demand growth sees a significant jump the next few years, she said softening margins would likely deter U.S. producers from expanding further.

Gasoline futures rose 2.11 cents, or 1.38%, to $1.5472 a gallon. Diesel futures rose 1.65 cents, or 1.11%, to $1.5082 a gallon.

Write to Alison Sider at alison.sider@wsj.com, Christopher Alessi at christopher.alessi@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

July 14, 2017 12:03 ET (16:03 GMT)