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Record high oil output from Saudi Arabia in
April failed to dent the move, although Goldman Sachs warned of
further oil price declines.
June Brent crude was up $1.34 at $66.25 a barrel by 1000 GMT
(6.00 a.m. EDT). June West Texas Intermediate (WTI) rose $1.03
to $60.31 a barrel.
The dollar was down 0.7 percent against a basket of currencies.
Dollar-traded commodities such as oil benefit from a weaker U.S.
unit as it makes them cheaper for holders of other currencies.
"We had a strong recovery of the U.S. dollar in the last few
trading session but we saw a reverse this morning," said Myrto
Sokou, senior analyst at Sucden Financial. "The weaker dollar is
providing support for prices."
Top global oil exporter Saudi Arabia raised its crude production
in April to a record high, feeding its flourishing Asian market
share and its own power plants and refineries.
The world's top oil exporter pumped 10.308 million barrels of
oil per day in April, a Gulf industry source told Reuters on
Tuesday, compared to 10.29 million bpd in March.
"This is an indication of strong demand, especially from Asia,
as well as increasing domestic consumption during summer," the
source said.
Saudi-led air strikes pounded the Yemeni capital Sanaa on
Tuesday, hours before a five-day truce was set to begin between
the alliance of Gulf Arab nations and the Iran-allied Houthi
militia that controls much of the country.
While Yemen is a marginal oil producer, its proximity to
shipping lanes has raised concerns over supply routes.
Brent dropped to a six-year low of $45.19 in January before
recovering to a 2015 high of $69.63 last week. But analysts
warned that the recovery may be short-lived.
"I think that the global surplus story is still going to persist
and that’s going to keep a cap on oil prices," said Michael
Hewson, chief markets analyst at CMC Markets.
Goldman Sachs said in a note that the price rally itself
prevented a reduction of oversupply and would therefore lead to
lower prices going forward.
"While low prices precipitated the market rebalancing, we view
the recent rally as premature with crude oil prices expensive
relative to current and forecast fundamentals," the U.S.
investment bank said.
(Additional reporting by Henning Gloystein and Florence Tan in
Singapore; Editing by Dale Hudson and William Hardy)
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