Oil up on weaker dollar, high U.S. inventory

Oil prices rose on Thursday on the back of a weaker dollar, but gains were capped by concerns about rising U.S. oil inventories and a persistent surge in new coronavirus cases.

Brent crude rose 35 cents, or 0.8%, to $44.64 a barrel by 0837 GMT, while U.S. West Texas Intermediate (WTI) crude gained 32 cents, or 0.8%, to $42.22 a barrel.

The U.S. dollar index against a basket of currencies was trading on Thursday near its lowest since early March. A weaker dollar usually spurs buying of dollar-priced commodities as they become cheaper for holders of other currencies.

“Genuine price support comes from the weak dollar, which helps physical oil demand,” Tamas Varga of oil brokerage PVM said.

But rising U.S. oil inventories put a break on further gains.

Reuters reports that U.S. crude and distillate inventories rose unexpectedly and fuel demand slipped in the most recent week, the U.S. Energy Information Administration said on Wednesday, as a sharp rise in coronavirus cases starts to hit U.S. consumption.

The United States reported more than 1,000 deaths from COVID-19 on Tuesday, according to a Reuters tally, the first time since June 10 the nation exceeded that figure in a day.

Barclays said on Thursday oil prices could see a correction in the near-term if a recovery in fuel demand slowed further, especially in the United States. The bank expects Brent to average $41 in 2020 and WTI to average $37.

Adding to uncertainty in the market, U.S.-Chinese relations deteriorated further as Washington gave Beijing 72 hours to close its consulate in Houston amid accusations of spying.