NEW YORK (Reuters) - Oil markets were mixed on Thursday with Brent flat even though the dollar slid, while U.S. crude rose as investors covered short positions.
“This is kind of an upside-down Thursday,” said Dominick Chirichella, co-president at the Energy Management Institute in New York. He said he was puzzled at why a weaker dollar did not boost Brent futures prices.
“The rise we’ve seen in U.S. crude has been more of a short covering rally rather than a return to the uptrend,” he added.
Global benchmark Brent LCOc1 slipped 3 cents to settle at $64.33 a barrel. U.S. West Texas Intermediate crude CLc1 gained 74 cents, or 1.2 percent, to settle at $61.34.
Those price moves cut the premium of Brent over WTI WTCLc1-LCOc1 to its lowest in six months.
“If the Brent-WTI spread narrows, the big incentive to export U.S. crude oil starts to narrow,” Chirichella said, noting he did not expect U.S. prices to hold at these higher levels for long since “all of the fundamental snapshots ... over the past couple of weeks have been bearish.”
The dollar .DXY slid to its lowest since it touched a three-year low in late January. [USD/] A weaker dollar often boosts prices for oil and other dollar-denominated commodities, making them cheaper for holders of other currencies.
“I’m surprised that (Brent) oil prices are falling today given the weaker U.S. dollar. Currently, the direction of the dollar is having a bigger impact on oil prices than fundamentals,” said Rob Thummel, portfolio manager at energy investment manager Tortoise Energy.
Oil had climbed on Wednesday and early on Thursday after Saudi Energy Minister Khalid al-Falih said OPEC hopes to keep limiting crude output to leave the market tight.
“Khalid al-Falih gave his strongest hint yet that exiting the current supply agreement is unlikely to be on the agenda this year,” said Tamas Varga of oil broker PVM.
The Organization of the Petroleum Exporting Countries and other produces including Russia have agreed to cut output by 1.8 million barrels per day through the end of 2018.
But surging U.S. production is offsetting OPEC’s efforts to curb supplies. U.S. crude output hit a record 10.27 million barrels per day last week, the Energy Information Administration (EIA) said on Wednesday, making it a bigger producer than Saudi Arabia. [EIA/S] The EIA expects U.S. production to top 11 million bpd in late 2018. [EIA/M]
Additional reporting by Henning Gloystein in Singapore and Alex Lawler in London; Editing by David Gregorio and Marguerita Choy