NEW YORK: Oil pared gains on Thursday after a stronger U.S. dollar pressured prices that earlier hit year highs due to falling U.S. inventories and the OPEC+ decision to stick to its output cuts.
Brent crude gained 17 cents to $58.63 a barrel by 12 p.m. EST (1700 GMT), having earlier hit its highest level since Feb. 21 at $59.04.
U.S. West Texas Intermediate (WTI) crude was up 27 cents $55.96 a barrel after reaching its highest settlement level in a year on Wednesday at $55.69.
“Fresh highs in Brent and gasoline again today keeping this bull market alive with OPEC+ output restraint still supportive item,” said Jim Ritterbusch of Ritterbusch and Associates.
But a strong U.S. dollar, which typically moves inversely with oil prices, took some of the steam out of oil’s momentum. The dollar hit a more than two-month high against a basket of other currencies.
On Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and allies – known as OPEC+ – extended its oil supply pact at existing levels, suggesting that producers are happy the cuts are draining inventories while uncertainty remains over the outlook for a recovery in demand as the COVID-19 pandemic lingers.
A document seen by Reuters on Tuesday showed that OPEC expects output cuts to keep the market in deficit throughout 2021, even though the group reduced its demand forecast.
Also on Wednesday, government data showed that U.S. crude oil stockpiles last week unexpectedly fell to 475.7 million barrels, their lowest level since March.
The market was also watching for developments in the next U.S. stimulus bill as Democrats in Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion coronavirus aid plan.
The number of Americans filing new applications for unemployment benefits decreased last week, suggesting that the jobs market was stabilising as authorities start to loosen pandemic-related restrictions on businesses.
(Additional reporting by Julia Payne and Jessica Jaganathan; Editing by Marguerita Choy and David Goodman)
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