Oil prices approaching a profitable range
Oil advanced to a three-month high amid signs central banks will continue to provide economic stimulus to support demand, and U.S. crude production fell.OPEC also appears to be stepping back from its suicide pact policy of pushing market share over price stability. The Russians are also stepping back from the brink. Both were reacting to the US domestic production gains that reduced the need for imported oil.
Futures rose 4 percent in New York, hitting $40 a barrel, after climbing 5.8 percent Wednesday. The Bloomberg Dollar Spot Index fell a second day after the Federal Reserve scaled back expectations for the pace of interest-rate gains. A weaker dollar bolsters investor demand for commodities priced in the currency. U.S. output slid to the lowest level since November 2014 and supplies expanded by 1.3 million barrels, the smallest gain in five weeks, according to government data.
“This is a strong rally and the main catalyst is the return of easy money,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The Fed announcement yesterday was the latest sign that central banks are going to continue with stimulus. This is putting downward pressure on the dollar, which favors commodities.”
West Texas Intermediate oil has surged about 50 percent since slumping to a 12-year low last month on speculation a global surplus will ease. American shale output is falling and some of the world’s biggest producers including Saudi Arabia and Russia are pledging not to raise their production.
The spot month contract for light sweet crude hit $40 per barrel before noon Houston time Thursday on the New York Mercantile Exchange.