Oil at 5-month high on weak dollar, forecasts glut will recede

Oilwell  REUTERS/Stringer/File Photo

Oil prices rose on Thursday, with Brent closing at a five-month high, as the dollar weakened and after a string of reports forecast the market would tighten further as fuel demand increased.

U.S. West Texas Intermediate crude briefly broke above $50 a barrel and settled 59 cents, or 1.2 percent, higher at $49.89, its highest close since July 31.

Brent crude futures gained 31 cents, or 0.6 percent, to settle at $55.47 a barrel, its highest close since April 13.

The North Sea benchmark has climbed more than $10 a barrel in three months and is close to where it began the year, partly due to a weaker dollar.

The U.S. dollar index was down 0.4 percent against a basket of currencies, making oilcheaper for holders of other currencies. Last week, the dollar index fell to its lowest level since the start of 2015..

"The IEA (International Energy Agency) revising up its 2017 global oil demand growth forecast, together with persistent weakness in the U.S. dollar index, has prompted bullish sentiment in the oil market. Anticipation is growing that this could quicken the pace of oil market rebalancing," said Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London.

On Wednesday, the IEA said a global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.

The Organization of the Petroleum Exporting Countries on Tuesday forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut.

"While WTI futures have scooped up some element of support from this week’s string of energy reports..., we are continuing to emphasize strengthening in Brent structure that has been developing for a couple of months," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

"Curtailed output out of about half of the OPEC producers and Russia is developing at a time when global demand is on the upswing strongly favors some increased impact off of OPEC’s rebalancing efforts."

BP Chief Executive Bob Dudley told Reuters in an interview that oil prices were likely to stay between $50 and $60 as major producers kept output restricted.

"We're all trying to make our way in this world of between $50 and $60 and I would expect that to continue."

(Additional reporting by Christopher Johnson in London and Aaron; Sheldrick and Osamu Tsukimori in Tokyo; editing by David Gregorio and Marguerita Choy)