Oil prices rose about 2% on June 27 and hit a one-week high, boosted by a weaker dollar, short covering and expectations that crude inventories in the U.S. may decline for the third consecutive week.
It was the fourth straight session of gains for oil, which also got some support after the Tim Dove, CEO of U.S. shale oil producer Pioneer Natural Resources Co. (NYSE: PXD), said Saudi Arabia likely will move to boost oil prices to prop its own national finances.
With the end of the quarter approaching, brokers said investors were covering short positions.
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Brent crude futures, the international benchmark for oil prices, gained $1.01 or 2.2% to $46.84 per barrel (bbl) by 10:49 a.m. CT (15:49 GMT). West Texas Intermediate (WTI) U.S. crude futures were up 92 cents, or about 2%, at $44.30/bbl.
Brent touched a one-week high at a session high of $47.06. WTI crude hit its highest since June 19 at $44.44.
Tim Evans, Citi Futures' energy futures specialist, said in a note that oil's upswing was "a technical correction after the declines of the past five weeks" helped along by boosts from a weaker dollar and forecasts for a weekly draw in U.S. crude inventories.
Industry group American Petroleum Institute was due to issue its inventory data the afternoon of June 27. On June 28, the U.S. Energy Information Administration will report official inventory data. Analysts estimated that crude stocks fell 2.3 million bbl in the week to June 23.
The dollar fell ahead of a speech by U.S. Federal Reserve Chair Janet Yellen in London.
Commerzbank said in a research note that long positions in Brent on ICE are "at their lowest level in a year and a half," while short positions "have soared to a new record high, having increased more than four-fold since the beginning of the year."
OPEC and other producing nations have sought to reduce a global crude glut with production cuts of 1.8 million bbl/d.
The cuts began in January and were later extended through March. Yet global crude inventories have not fallen as expected, as U.S. producers and others outside the OPEC-led regime have boosted output.
Ian Taylor, head of the world's largest independent oil trader Vitol, told Reuters Brent prices would stay in a range of $40/bbl to $55/bbl for the next few quarters.
OPEC delegates said the cartel will not rush into making a further cut in output or end some countries' exemptions from output limits, although a meeting in Russia next month is likely to consider further steps.
OPEC members Nigeria and Libya are exempt from the cuts and have raised production substantially. Iran has also been allowed a small increase.
Libya's oil production stands at about 935,000 bbl/d this week after touching as high as 950,000 bbl/d last week, Libyan oil sources said.
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