Oil advances as cheap dollar stokes demand for tightening supply

Oil Price Surge Above $70 As Dollar Continues To Fall

Oil prices settled higher on Friday after hitting three-year highs, with crude also posting a weekly gain as a weaker USA dollar underpinned prices.

Worldwide benchmark Brent futures were nudging 71 dollars per barrel. Its session high of $71.28 a barrel was the highest since early December 2014.

Oil traders are reacting to "U.S. dollar movements", Eric Nuttall, a portfolio manager with Ninepoint Partners LP in Toronto, said in a phone interview.

USA crude increased to $66.44, also the highest since December 2014, before reducing to $66.05, still up 44 cents.

One trigger could be US production, which is expected to rise above 10 million barrels a day this year.

Net U.S. crude imports fell last week by 71,000 barrels per day.

A weaker dollar makes dollar-denominated commodities less expensive for other currency holders which has a habit to support oil prices. The storage is down 16 percent from 488.3 million barrels one year ago. Reduced flows from the Keystone pipeline from Canada helped drain supply there, along with further outflows from the new Diamond Pipeline. In late December, that spread touched $7 a barrel, which spurred USA exports and reduced imports.

"A lot of people looking at the oil market focus 90% of their time on supply", Pavel Molchanov, an energy research analyst at Raymond James in Houston, said by telephone. This reflected expectations that companies will continue to sell barrels at the current higher price. An involuntary drop in Venezuela's output in recent months has deepened the impact of those cuts.

Mr. Trump "did attempt yesterday evening to dispel the impression that his government prefers a weak USA dollar.but he didn't really succeed, " according to analysts at Commerzbank on Friday. Money managers raised their net long US crude futures and options positions in NY and London by 7,612 contracts to 549,602 in the week to January 23, a new record high, the US Commodity Futures Trading Commission (CFTC) said.

Refinery crude runs fell by 392,000 barrels per day, EIA data showed.

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