Oil prices lifted by weaker dollar, soaring equities

US dollar falls to lowest level in over two years against basket of currencies

LONDON:

Oil prices rose on Tuesday, reversing overnight losses against the backdrop of an equities bull run and a sliding US dollar.

Brent crude futures climbed $0.4 to $45.68 a barrel by 0930 GMT. US West Texas Intermediate (WTI) crude futures also rose $0.4, hitting $43.01 a barrel.

The dollar was at its lowest in more than two years against a basket of currencies, pressured by the US Federal Reserve’s loosening of inflation policy last week, making dollar-priced commodities cheaper for global buyers.

Strong Chinese manufacturing data also lifted oil prices, said Jeffrey Halley, a senior market analyst at Oanda.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) showed China’s factory activity expanded at the fastest pace in nearly a decade last month, bolstered by the first increase in new export orders this year.

Bulls also pushed up equities, with the MSCI world equity index close to a record peak on Tuesday. Yet oil, which often moves in tandem with equities, remains reined in by demand concerns.

PVM analyst Tamas Varga said oil prices are likely to move below recent levels, citing sizeable downward revisions to second-half demand estimates by the International Energy Agency and the Organisation of the Petroleum Exporting Countries (OPEC).

Ahead of the release of US stockpile data from the American Petroleum Institute, due at 2030 GMT, a Reuters’ poll found that analysts expect US crude stocks to have fallen by about two million barrels in the week to August 28.

Gasoline inventories were expected to have fallen by 3.6 million barrels, with distillate inventories including diesel and heating oil down by 1.5 million barrels, according to six analysts polled by Reuters.