Weak dollar and big US crude exports boost oil markets
Oil prices rose by around 3% on Wednesday on record US crude oil exports and refineries in the country operating at higher levels than usual for this time of the year.
Dollar weakness also provided support, as the dollar's recent strength has been a major factor hindering gains in the oil market.
Brent crude futures rose $2.17, or 2.3%, to $95.69 a barrel. US West Texas Intermediate (WTI) crude oil rose $2.59, or 3%, to $87.91.
The US dollar makes oil cheaper for holders of other currencies. The US dollar has been stronger than other major foreign currencies as the US Federal Reserve has been more aggressive in raising interest rates.
"Overall this is a dollar-denominated move and if you try to read outside of that, it would be foolish," said Eli Tesfaye, senior market strategist at RJO Futures.
U.S. crude inventories rose by 2.6 million barrels last week, more than expected, but that was lower than industry figures that showed an increase of 4.5 million barrels, according to weekly government data.
Crude oil exports rose to 5.1 million barrels a day, the highest level ever, while US net crude oil imports also fell to the lowest level in history.
"Overall, thanks to the export market, this is turning into a bullish report despite a moderate build in commercial crude inventories," said John Kilduff, partner at Again Capital in New York.
Traders attributed the rise in exports to a widening of the WTI-Brent spread, which was more than $8 a barrel in Wednesday's trade.
US refining rates held steady at around 89% of capacity, the highest for this time of year since 2018.
The Organization of Petroleum Exporting Countries surprised markets earlier this month with a larger-than-expected cut in production targets. Oil analysts predict that supply will tighten in the coming months following this move and with Europe expected to ban oil imports from Russia next month and restrict Russian shippers from the global transportation insurance sector.
This ban could tighten world shipping markets, which could push oil prices higher. Many analysts believe that Russia will be able to overcome these measures, but it could still cause Moscow to halt production of between 1 million and 2 million barrels per day, which could hit distillates markets.
"We believe that by 2024 the oil price will be strongly influenced by the availability of tankers willing to transport Russian oil rather than global supply-demand fundamentals, keeping the oil price high," JP Morgan analysts said.
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