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Oil tops $60 on weaker dollar, bets for U.S. supply drop

MarketWatch

Published: May 12, 2015 12:11 p.m. ET

Oil futures climbed on Tuesday, buoyed by a weaker dollar as traders bet that upcoming data will show a decline in U.S. crude supplies.

Prices also got a boost from a report that forecast further production declines in June among key U.S. shale plays and news of new airstrikes in Yemen ahead of a cease-fire.

On the New York Mercantile Exchange, June crude CLM5, +2.40% traded at $60.83 a barrel, up $1.58, or 2.7%. Brent crude for delivery in June LCOM5, +2.94% added $1.96, or 3%, to $66.88 a barrel on London’s ICE Futures exchange.

Oil’s climb is sponsored in part by Monday’s drilling productivity report in the U.S. from the Energy Information Administration, “which points to a drop in U.S. oil production at a couple of key shale plays next month,” said Matt Smith, commodity analyst at Schneider Electric. “This bullish influence is in conjunction with a sliding U.S. dollar DXY, -0.73% amid a strong selloff in global bond markets and equity markets too.”

The EIA forecasts that total oil output from seven major shale plays will decline by 86,000 barrels a day in June. Read: Shale oil output at Bakken and Eagle Ford starts a descent

Oil’s rally intensified in late morning trading. It’s likely a “geopolitical fear bid after renewed airstrikes were reported in Yemen just hours before a new cease-fire was to be initiated,” said Tyler Richey, an analyst for the 7:00’s Report,

Meanwhile, analysts polled by Platts expect the EIA’s weekly inventory report due Wednesday to show a fall of 250,000 barrels in crude inventories. Inventory data from the American Petroleum Institute will come out late Tuesday.

In a monthly report Tuesday, the Organization of the Petroleum Exporting Countries slightly raised its view on world oil demand growth for this year to 1.18 million barrels a day to reach 92.5 million barrels a day. That compares with total oil consumption of 91.32 million barrels a day in 2014. OPEC’s next meeting is set for June 5. See: OPEC doesn’t see oil prices consistently trading at $100 in the next decade.

The EIA will also release its monthly energy outlook report later Tuesday. The International Energy Agency will publish its report Wednesday.

Tuesday’s moves helped extend a recent rally in oil prices which has been driven by signs of slowing U.S. oil production. Nymex West Texas Intermediate crude is up around 14% year to date.

Oil-market fundamentals, however, remain weak, Goldman Sachs said in a report. The bank estimates the global oil market will be oversupplied by 1.9 million barrels a day in the current quarter, the largest quarterly stock build this year. Goldman also said that WTI settling above $60 a barrel could lead to U.S. producers ramping up activity again.

On Nymex, June gasoline RBM5, +2.75% tacked on 4.6 cents, or 2.3%, to $2.03 a gallon and June heating oil HOM5, +2.85% added 5.2 cents, or 2.7%, to $2 a gallon.

June natural gas NGM15, +3.93% rallied 10.8 cents, or 3.9%, to $2.909 per million British thermal units.

http://www.marketwatch.com/story/oil-prices-gain-in-volatile-trade-as-dollar-weakens-2015-05-12