Alberta oil well in canola field
Oil prices hovered near five-month highs on Thursday as support from a weak dollar .DXY and falling U.S. crude inventories counteracted bearish sentiment about fuel demand, pushing the benchmarks in and out of positive territory.
U.S. crude was up 43 cents at $42.62 after a four-day streak of gains.
Brent crude was up 48 cents at $45.65 a barrel.
The two benchmarks rose to their highest since March 6 in the previous session after the Energy Information Administration reported a much bigger than expected drop in U.S. crude stockpiles.
A weaker U.S. dollar was also supportive for oil prices as it makes dollar-priced oil cheaper for holders of other currencies.
The dollar index, which measures the greenback against a basket of six major currencies .DXY, logged its biggest monthly percentage fall in a decade in July, and a Reuters poll found analysts expected it to continue falling into next year.
The index was up around 0.09% Thursday after falling for two sessions, but stayed near two-year lows.
Still, oil investors remain wary of rising U.S. refined product inventories at a time when U.S. central bankers said the resurgence in coronavirus cases was slowing the economic recovery in the world’s biggest oil consumer.
EIA data showed distillate stockpiles, which include diesel and heating oil, climbed to a 38-year high and gasoline inventories unexpectedly rose for a second week.
The U.S. EIA calculated gasoline demand remains at around 8.6 million barrels per day, around 10% lower than a year earlier, just as the U.S. driving season was winding down.
“In the medium term the weak demand is likely to weigh more heavily than the positive sentiment (is supportive), which is why we expect prices to correct in the near future,” Commerzbank analyst Eugen Weinberg said.
JPMorgan trimmed its oil demand forecast for the second half of the year by 1.5 million barrels per day, but raised its average Brent price forecast for the whole year to $42 a barrel from $40.