Oil prices rose slightly in trading on Friday due to a weakening US dollar. Linn Energy photo.
WTI oil prices hit highest level since Dec. 2014 on Thursday
Oil prices rose on Friday after hitting three-year highs in Thursday trading on a weakening US dollar and despite production increases which could see US output hit over 10 million barrels per day soon.
By 12:43 p.m. EST, Brent crude was up 19 cents to $70.16/barrel. On Thursday, Brent reached a session high of $71.28, its highest since 2014. US WTI rose 57 cents to $66.08/barrel, and on Thursday, WTI hit its highest level since December 2014 at $66.66.
The Canadian Crude Index rose 64 cents to $39.15.
“One has to question if this rally is sustainable. Downside protection is going to be warranted,” Brian LaRose, technical analyst at United-ICAP told Reuters.
Both WTI and Brent are set for weekly gains on support from a US dollar that hit new three-year lows against a basket of other leading currencies on Friday.
On Friday morning, Brent was up 2.7 per cent on the week and WTI was on track for a weekly gain of 4 per cent.
“This inverse dollar relationship with crude can be nebulous at times, but we’ve reached a point where the impact will be felt in the form of higher crude prices,” John Kilduff, partner at Again Capital LLC told Reuters.
A weakening US dollar can boost oil demand as crude becomes cheaper for countries using other currencies. But, according to Reuters, crude prices are capped by seasonally weakening demand in the northern hemisphere.
Many refiners cut their crude purchases because they have scheduled maintenance beginning in early spring.
Georgi Slavov, head of research at Marex Spectron told Reuters “demand is starting to weaken as … refining capacity was taken out of the market.”
US bank Morgan Stanley noted that global oil stocks built up overall during the week ending Jan. 19.
And US supply continues to rise. The US Energy Information Administration forecasts US crude output to crest over the 10 million barrels per day (b/d) mark soon. This will put the United States on par with Saudi Arabia, but both are behind Russia which averaged 10.98 million b/d in 2017.
This rising US supply threatens to kneecap the OPEC supply cut agreement which has set a goal of reducing participants’ production by a total of 1.8 million b/d.
On Friday, Baker Hughes released its weekly rig count, which is an early indicator of future output. During the past week, US drillers added 12 oil rigs, the biggest increase since March. The total number of oil rigs is 759. This time last year, there were 566 rigs in operation in the United States.
In Canada, the number of oil rigs rose by 12 to 220. At this time in 2017, there were 200 oil rigs in Canada.