SINGAPORE: Oil prices were lifted Wednesday by a weaker dollar after Federal Reserve chief Janet Yellen signaled a cautious approach to US interest rate hikes, but rises were tempered by worries about a supply glut.
A US energy department report to be released later in the day is expected to show another rise in US commercial crude stockpiles, indicating softer demand in the world’s top oil consumer.
At around 0340 GMT Wednesday, US benchmark West Texas Intermediate (WTI) for May delivery was up 30 cents, or 0.78 percent, at $38.58 and Brent crude for May was 18 cents, or 0.46 percent, higher at $39.32.
Both contracts had been sliding since the middle of last week after bouncing back from near 13-year lows reached in February.
The dollar weakened after Yellen said Tuesday that interest rates were not likely to rise before June and that any move will be slow and gradual.
A weaker US currency makes dollar-priced oil cheaper for holders of other units, encouraging traders to buy and lifting prices.
But analysts said any oil price rise not driven by real demand is unlikely to last.
“The oil price advance today is going to be quite limited. If it hinges on US dollar weakness, it is not going to go much higher,” said Bernard Aw, market strategist at IG Markets in Singapore.
“In the longer term, it’s still a demand and supply game. It’s still a supply glut issue.
There’s only so much the US dollar can do.”
Prices have collapsed from levels above $100 in mid-2014 largely due to supply outrunning demand as global economies, particularly China, suffer a growth slowdown.
Major producers led by Russia and Saudi Arabia will meet in Doha on April 17 to discuss measures to stabilize prices, including a proposal to freeze output.