Oil edged higher on weak dollar and low US diesel inventories

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SINGAPORE — Oil prices reversed earlier losses and rose in Asian trade on Friday, supported by a weaker U.S. dollar and falling diesel inventories, while Saudi Arabia and Washington continued to clash over OPEC+ plans to cut production.

Brent crude futures rose 29 cents, or 0.3%, to $94.86 a barrel at 0242 GMT, while US West Texas Intermediate (WTI) crude futures rose 31 cents, or 0.35%, to $89.42 a barrel.

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Both contracts were down about 3% for the week, however, after two previous weeks of gains amid recession fears.

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“The weaker US dollar and strong rebound in risk assets drove oil prices higher, the rebound momentum may continue into today’s Asian session,” said Tina Teng, an analyst at CMC Markets, as a weaker dollar generally makes dollar-denominated commodities like oil cheaper. for holders of other currencies.

« OPEC+’s production cut will continue to support crude prices, along with a possible recovery in Chinese demand in the fourth quarter if Beijing eases COVID restrictions, » Teng added.

China, the world’s biggest crude oil importer, is battling a COVID rebound after its week-long National Day holiday earlier this month and just ahead of a key Communist Party congress where President Xi Jinping is expected to extend his leadership. The country’s infection count is low by global standards, but it adheres to a zero COVID policy.

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Meanwhile, Saudi Arabia and the United States have continued to clash over a decision last week by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to reduce its oil production target. Saudi Arabia, the de facto leader of OPEC, dismissed Washington’s criticism as « not based on fact » and that the US request to delay the cut for a month would have had negative economic consequences.

The White House said it presented the Saudis with an analysis showing the cuts could harm the global economy and alleged the Saudis pressured other OPEC members in a vote. Officials from both countries are expected to continue discussions soon.

Oil prices were also supported by a sharp drop in distillate inventories, as demand for heating oil is expected to increase as winter approaches.

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Distillate inventories, which include diesel and fuel oil, fell 4.9 million barrels to 106.1 million barrels, their lowest level since May, against an expected decline of 2 million barrels, according to the US Energy Information Administration on Thursday.

This comes amid a larger than expected increase in US crude oil stockpiled, as well as a rise in gasoline inventories. Crude inventories rose 9.9 million barrels in the week to Oct. 7 to 439.1 million barrels, the EIA added, well above analysts’ expectations in a Reuters poll for a rise of 1.8 million barrels.​

“The market ignored the 10 million barrel build in U.S. crude inventories last week and focused on a 4.9 million barrel decline in distillate inventories ahead of the heating demand,” ANZ Research said. in a Friday note, adding that developments such as the OPEC+ oil production cut and Russian oil sanctions « create the perfect backdrop for price volatility. » (Reporting by Laila Kearney in New York and Emily Chow in Singapore; Editing by Stephen Coates and Sam Holmes)