LONDON, (Reuters) – Oil rose towards $83 on Friday, poised for a second consecutive weekly gain on a softening dollar and as views emerged that energy demand growth would continue in the developing world.
The front-month U.S. crude contract rose 74 cents to $82.85 a barrel by 1328 GMT. It reached $83.03 a barrel on Wednesday, the highest level since Jan. 11, when prices touched a 15-month peak of $83.95.
London ICE Brent for April rose 72 cents to $81.00. “The dollar is moving the price around, and the oil market is mostly being driven by external factors,” said Eugen Weinberg, head of commodity research at Commerzbank.
The dollar index slipped 0.50 percent to 79.819 against a basket of currencies on Friday, after mixed data on U.S. trade and jobless claims signalled the economy was improving at a slow pace.
A weaker dollar usually supports oil prices as it makes dollar-denominated commodities less expensive for holders of other currencies.
The International Energy Agency (IEA) on Friday said world oil demand this year will be slightly higher than previously expected because of growth in developing countries.
The agency lifted its absolute demand estimates for 2009 and 2010 by 70,000 barrels per day (bpd) from its estimate in February. It now expects world demand to average 86.57 million bpd this year. “We revised up figures for both 2009 and 2010 on the basis of strong non-OECD demand,” David Fyfe, head of the oil industry and markets division of the IEA, told Reuters. By contrast, the 2010 OECD forecast was revised down, largely due to expectations of lower first-quarter heating oil demand in Europe and continued North American weakness, notably in middle distillates, the IEA said.
Weinberg said this was a possible risk, as China in particular has been a concern due to the country’s recent inflation data showing a 16-month high and arguments for policy tightening and possible bank reserve increases. “Most markets are operating on the presumption of continued Chinese growth, and should China disappoint, you had better not be in the commodities markets,” Weinberg said. On a bullish note, White House economic adviser Larry Summers said on Thursday the United States was “very close” to the point where job growth can begin.
Officials at the Organization of the Petroleum Exporting Countries, which meets in Vienna on March 17 to discuss production policy, have said they do not expect a change in targets while prices are within their desired range. “To a large extent, all OPEC ministers need to do at this juncture is maintain the current policy stance, and to float along with the positive and improving data flow,” Barclays Capital analysts headed by Paul Horsnell said in a report.