Crude oil prices and commodity-related exchange traded funds are pushing higher for the fourth straight day as traders speculate on the likelihood of production cuts to stabilize the market and a weakening U.S. dollar helped support prices.
On Tuesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, 1.0% and was testing its resistance at the 50- and 200-day simple moving averages. The United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, gained 1.0% and was trading back above its short-term, 50-day trend line.
Meanwhile, WTI crude oil futures were 1.5% higher to $46.4 per barrel while Brent crude was up 1.4% to $49.0 per barrel.
Crude oil prices have been rallying as investors anticipated oil producers will take action to rein in the ongoing supply glut after Saudi Energy Minister Khalid al-Falih said the kingdom would work with other major producers to stabilize markets, reports Libby George for Reuters.
“It was a piece of good news that the market latched onto,” Harry Tchilinguirian, head of commodity market strategy at BNP Paribas, told Reuters.
Further supporting prices, over 700,000 barrels per day of oil were missing in Nigeria due to militant attacks and pipeline problems.
Venezuela is also on track for its steepest annual oil output decline in 14 years as the government tackles with economic and political problems after years of under investment and mismanagement.
Meanwhile, in the U.S., the Energy Information Administration projected the shale oil industry production will fall for a tenth consecutive month in September.
Furthermore, the weakening U.S. dollar also helped bolster the oil market on Tuesday. The U.S. Dollar Index (DXY), which tracks the USD’s movement against a basket of major international currencies, dipped 0.9% to 94.8 after San Francisco Fed President John Williams argued that central banks might have to raise inflation targets, focus more on growth and back much looser fiscal policies, diminishing the likelihood of a September rate hike.
“The Williams paper yesterday was pretty dovish, so people are selling dollars. Dollar yields are lower pretty much across the curve since the release,” Citi strategist Josh O’Byrne told Reuters.
For more information on the crude oil market, visit our oil category.
United States Oil Fund