Oil jumps to 5-month high on US crude stocks drop, weak dollar

LONDON: Oil prices rose to their highest since early March yestrday on data showing a big drop in US crude inventories, and a weak dollar, but mounting coronavirus infections weighed on the demand outlook.

Brent crude was up US$1.63, or 3.67%, at US$46.06 (RM193.33) a barrel by 1215 GMT, while West Texas Intermediate oil rose US$1.59, or 3.81%, to US$43.79 (RM183.80) a barrel. Both contracts gained more than 4% earlier in the session.

US crude inventories fell by 8.6 million barrels in the week to Aug. 1 to 520 million barrels, compared with analysts' expectations for a three-million-barrel drop, the American Petroleum Institute found.

Official numbers were due out later yesterday.

A weaker dollar, which makes oil cheaper for holders of foreign currencies, also supported prices.

"There's no escaping the benefits of a weaker dollar in the commodity space and oil is certainly basking in its decline," senior OANDA analyst Craig Erlam said.

Sentiment also drew support from signs that talks between Democrats in Congress and the White House on a new coronavirus relief package are making progress, although the sides remain far apart.

“We see gasoline (petrol) demand coming in close to 7% year-on-year lower through Q3, with gasoil/diesel registering a decline of some 4%, implying a continued slowdown of the recovery, with a global return to 2019 levels this year increasingly in doubt,” JBC Energy said.

The consultancy sees jet fuel demand down 50% year on year lower through the third quarter. – Reuters