Oil creeps higher before US payrolls

5th February 2016, Comments 0 comments

World oil prices held firm on Friday, guided by the weaker dollar ahead of non-farm payrolls data in top global crude consumer the United States.

In midday deals in London, Brent North Sea crude for April delivery added 29 cents to stand at $34.75 per barrel.

US benchmark West Texas Intermediate for delivery in March added 38 cents to $32.10 a barrel, compared with Thursday's close.

Shailaja Nair, from energy information provider Platts in Singapore, told AFP that crude prices have received support from the flagging dollar.

"The dollar will always have an add-on effect on crude oil prices... The volatility in the dollar and the volatility in crude have been like a constant for the past two to three weeks now," Nair said.

Oil is traded in dollars and a softening of the US currency makes crude cheaper for holders of other units, increasing demand for the commodity.

Nair added that the upcoming Lunar New Year holiday weekend has also contributed to a lull in the market, but the price rise was unlikely to last should market fundamentals remain the same.

The oil market has witnessed another choppy week as traders tracked hopes of a coordinated output reduction by major world petroleum producers.

At the same time, crude prices remain under pressure from a vast global supply glut.

"The demand is not growing... the glut will only go if the production is cut and we have seen no indications of that," Nair said.

Despite speculation of a potential deal by producers to cut output, analysts say that such a deal must involve the market's major players.

"With the absence of large producers like Saudi Arabia and Iran, I don't see much of a point in the other OPEC members trimming output. Any gaps will be quickly filled by other producers to increase market share," Bernard Aw, a market strategist with IG Markets, said in a note.

A price rebound last week driven by talk of possible coordination between Russia and OPEC to slash production petered out after traders brushed aside speculation.

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© 2016 AFP

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