SINGAPORE: Oil prices climbed Thursday, building on the previous day’s gains following a bigger-than-forecast fall in US stockpiles, and a plunge in the dollar after the Federal Reserve kept interest rates on hold.
The commodity rallied Wednesday after the US Department of Energy said inventories had tumbled by more than six million barrels last week, almost twice as much as expected, indicating a pick-up in demand in the world’s top economy, reports AFP.
“This drop is expected to alleviate glut concerns and will further support the crude oil prices,” CMC Markets market analyst Margaret Yang wrote in a note.
At about 0730 GMT, the US benchmark West Texas Intermediate was up 49 cents at $45.83, while Brent added 46 cents to $47.29. Both contracts climbed more than two percent Wednesday.
The gains were given extra momentum by the a weaker dollar, which makes oil cheaper for people holding other currencies.
The greenback tumbled after the Fed said the US economy was improving and the argument for an interest rate rise was strengthening but more evidence of sustained progress was needed before any action was taken.
While broadly expected, the decision to hold borrowing costs at ultra-low levels was cheered across global markets, sending equities and higher-yielding currencies soaring.
News that oil giants Saudi Arabia, Iran and Qatar met at OPEC headquarters in Vienna to discuss production cuts ahead of next week’s informal producers’ meeting in Algeria also provided strong support to the crude rally.
OPEC and non-OPEC member states are due discuss in Algiers a global supply glut and overproduction that have hammered prices for more than two years, sending them to near 13-year lows at the start of 2016.
Previous efforts in April for a production cap fell apart after OPEC member
Iran—which had just come out from years of Western nuclear-linked sanctions refused to take part.