Following two days of a losing streak, crude oil prices bounced back during Tuesday trade, amid optimistic comments from OPEC Secretary-General Mohammad Barkindo and the unexpected decline in U.S. inventories. Crude oil prices also experienced support from a decline in the value of the dollar against the basket of other currencies.
West Texas Intermediate crude oil surged 0.7% to settle around at $50.29 a barrel, while Brent crude oil increased 0.3% to $51.68 a barrel.
Crude oil prices are in the doldrums since they breached the physiological mark of $50 a barrel, as a potential OPEC deal and a possible positive impact of improved prices on the U.S. shale output continue to pull prices in opposite directions. Traders and analysts fear that any growth in crude oil prices is going to provide support to North American producers, who already showed strong resistance to lower oil prices.
However, crude oil prices increased further in early Asian trade on Wednesday, supported by weaknesses in the U.S. dollar exchange rate and the potential decline in U.S. inventories based on the American Petroleum Institute weekly report. The WSJ Dollar Index, which tracks the dollar against a basket of other currencies, declined 0.10%. A weaker dollar makes oil cheaper for consumers who deal in other currencies.
The API reported a decline of 3.8 million barrels in the U.S. domestic crude inventories and 2.3 million barrels in distillate stocks for the last week. The monthly report from the Energy Information Administration also forecast a drop of 30,000 barrels in crude oil production from U.S. shale plays next month.
WTI surged to $50.76 a barrel in early Asian trade on Wednesday, while Brent crude increased to $52.16 a barrel. The official report from the EIA is due today, which could provide an additional boost to prices if they also reported a decline in domestic U.S. crude inventories. Nevertheless, the long-term crude oil fundamentals are highly dependent on the OPEC deal and their impact on market supplies.
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