MELBOURNE – Oil prices were mixed on Thursday as the falling U.S. dollar offset some of the concerns that fuel demand could stall because of rising global coronavirus infections.
U.S. West Texas Intermediate (WTI) crude CLc1 futures were down 8 cents, or 0.19%, to $42.11 a barrel by 0710 GMT while Brent crude LCOc1 futures rose 20 cents, or 0.44%, to $45.37 a barrel from an intraday low of $45.10.
The two benchmark contracts rose more than 1% on Wednesday to their highest since March 6, completing a four-day rally, after the Energy Information Administration reported a much bigger than expected drop in U.S. crude stockpiles. [EIA/S]
“Asia today, with a light data calendar and no headlines of note, appears to be content to range trade. Thus we are seeing both Brent and WTI flip-flopping each side of unchanged, trading exclusively on intra-day short-term flows, with no overriding theme,” said Jeff Halley, senior market analyst at OANDA.
“I expect that state of affairs to spill over into Europe, unless the US Dollar tracks lower aggressively again, in which case oil should grind higher,” Halley added.
The recent declines in the U.S. dollar have supported higher oil prices. Since oil futures are priced in dollars, crude prices tend to rise to offset the weaker currency.
“Since oil is priced in dollars, that is good for oil,” AxiCorp market strategist Stephen Innes said in a note.
The dollar index, which measures the greenback against a basket of six major currencies .DXY, logged its biggest monthly percentage fall in a decade in July and a Reuters poll found analysts expect it to continue falling into next year. The index has dropped for the past three days and is down 0.16% on Thursday.
Still, investors remained wary of rising U.S. refined product inventories at a time when U.S. central bankers said the resurgence in cases was slowing the economic recovery in the world’s biggest oil consumer.
EIA data showed distillate stockpiles, which include diesel and heating oil, climbed to a 38-year-high, and gasoline inventories unexpectedly rose for a second week in a row.
“It is difficult to get overly constructive towards the oil market with demand having stalled and this product overhang,” ING Economics said in a note on Thursday.
The U.S. EIA calculated gasoline demand remains around 8.6 million barrels per day, around 10% lower than a year earlier, just as the U.S. driving season, which ANZ Research called the “world’s biggest seasonal demand period”, was winding down.