Oil
leaps 5 percent as dollar rally stalls, U.S. rigs fall
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[May 30, 2015]
By Barani Krishnan
NEW YORK (Reuters) - Crude oil prices
jumped almost 5 percent on Friday, their biggest rally in 1-1/2 months,
as a steady U.S. dollar and a bigger than expected drop in U.S. oil rigs
in operation set off a renewed rush of bullish bets.
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U.S. crude has risen by as much as $4 a barrel after hitting a
one-month low just a day ago, locking in a record 11th weekly gain
that was propelled both by declining domestic oil inventories and
rapidly shifting sentiment ahead of next week's OPEC meeting, at
which the group is expected to keep production at high levels.
Oil bulls were also enthused by Friday's rig count data from Baker
Hughes, which showed U.S. drillers again reducing the number of rigs
in operation this week despite speculation that they would add more.
A lower rig count signals potentially lower production.
Brent crude <LCOc1> settled at $65.56 a barrel, up $2.98, or 4.8
percent, on the day. It was flat on the week, while for the month,
it fell 2 percent.
U.S. crude <CLc1> ended at $60.30, up $2.62, or 4.5 percent, on the
day, and up about 1 percent on both the week and month.
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Tensions in the Middle East after the Islamic State claimed
responsibility for a mosque bombing in Saudi Arabia that killed
three people added to the market's support.
"The dollar's stalling provided the spark for today, and coupled
with the bullish crude draws data, the encouraging rig count numbers
and Middle East worries, the market just went into a frenzy," said
John Kilduff, partner at New York energy hedge fund Again Capital.
The dollar edged lower against a basket of major currencies <.DXY>
on Friday, after having risen 2.5 percent this month.
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Oil bears cautioned that prices could fall again on the global
supply glut. Pressure might build by next week if the dollar rallies
and OPEC decides not to cut output, they said.
OPEC is expected to maintain a collective output target of 30
million barrels per day and produce 1 million bpd above that. Demand
for its oil is much lower, leaving an estimated surplus above 2
million bpd.
"The dollar has been as imperative as anything to recent moves in
oil, and OPEC has been over-producing, so I expect another leg lower
in prices," said Tariq Zahir, an oil bear at Tyche Capital Advisors
in Laurel Hollow, New York.
(Additional reporting by Christopher Johnson in London and Henning
Gloystein in Singapore; Editing by Marguerita Choy; and Peter
Galloway)
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