Crude near one-week high on falling dollar

Gold heads for weekly rise

LONDON/TOKYO, Feb 17, (RTRS): Oil prices stood near a one-week high on Friday as global equities headed for their biggest weekly gain in six years as the dollar slipped to a threeyear low.

US West Texas Intermediate crude for March delivery was down 20 cents at $61.15 a barrel by 1410 GMT, having touched a one-week high of $61.89. Activity was subdued, with many Asian markets closed for the Lunar New Year holiday.

The US crude contract has risen by about 3 percent on the week after losing nearly 10 percent last week.

London Brent crude was up 5 cents at $64.38. Brent is up nearly 3 percent for the week after a decline of more than 8 percent last week.

“Oil is getting support from a rebound in global stock markets and a weak dollar, but the upside is limited due to a projection for rising US production,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

Also supporting oil prices was a statement from the United Arab Emirates energy minister late on Thursday saying oil producers led by Saudi Arabia and Russia aimed to draft an agreement on a long-term alliance by the end of the year.

OPEC and some non-OPEC producers including Russia have been restraining production by 1.8 million barrels per day (bpd) to prop up prices. The arrangement expires at the end of 2018.

Offsetting

However, surging US production is offsetting those efforts. US crude output hit a record 10.27 million bpd last week, the Energy Information Administration said on Wednesday, making it a bigger producer than Saudi Arabia.

“Drilling activity in the US continues to pick up ... Adding to this, producers appear to be more efficient than they were mid last year,” ING said in a note, adding that rising US supplies and the liquidation of speculative longs were likely to keep oil prices under pressure.

Meanwhile, gold eased from a three-week high on Friday as the dollar index bounced from a three-year low, but the metal remained on track for its biggest weekly gain in nearly two years on the back of weakness in the US currency and inflation concerns.

The dollar hit its lowest since 2014 in overnight trade and despite bouncing back into positive territory was heading for its biggest weekly loss in two years as negative sentiment offset support from rising Treasury yields.

Spot gold was at $1,352.46 an ounce at 1435 GMT, little changed from Thursday but off an earlier three-week peak of $1,361.76. US April gold futures were also steady at $1,354.70, off a high of $1,364.40.

“We’re looking for the dollar to keep weakening. For me that’s the key thing to watch for gold,” said Daniel Smith, director of commodity services at Oxford Economics. “Gold tends to do particularly well in that kind of environment.”

Inflation

Signs of rising inflation were also helping to drive the metal higher, he said. “If inflation expectations rise faster than nominal rate expectations, then this should add fuel to the fire, particularly in an environment of US dollar weakness.”

Spot gold has risen 2.7 percent so far this week, putting it on track for its biggest weekly rise since April 2016. Gold has fared less well in other currencies, rising 1 percent in euro terms and 1.4 percent in sterling.

The dollar hit a three-year low versus a currency basket on Friday, hurt by concerns that Washington might pursue a weakdollar strategy and the perceived erosion of its yield advantage as other countries consider tighter monetary policy.

Data this week showed US producer prices accelerated in January, while initial claims for state unemployment benefits increased in the week to Feb 10.

On the physical side of the market, demand in Asia was muted by the Lunar New Year holiday, closing markets in major consumer China as well as in South Korea, Malaysia and Vietnam.

In India, physical gold was sold at a discount for the first time in three weeks as demand slumped because of a jump in local rates. Gold in rupee terms hit a 15-month high of 30,836 rupees on Friday.

Demand was down to a quarter of usual levels as buyers were deterred by the recent price rise, said Harshad Ajmera, owner of wholesaler JJ Gold House in Kolkata.

Among other precious metals, silver was down 0.7 percent at $16.75, while platinum gained 0.3 percent to $1,003.70 after hitting its highest since Jan 29 at $1,012.70. Palladium was up 1.4 percent at $1,032.22. It has risen 5.8 percent this week, its best since October.