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Oil advanced with support from a weaker dollar and expectations of declining U.S. crude inventories.
Futures in New York rose as much as 1.5% on Dec. 29, though liquidity was thin. A dip in the dollar boosts the appeal of commodities such as oil that are priced in the currency. Meanwhile, domestic crude inventories are seen falling 2.6 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg. The industry-funded American Petroleum Institute will release its stockpile tally later Dec. 29.
Inventories are expected to fall because of rising refinery runs and a strong export window for U.S. crude, according to Phil Flynn, senior market analyst at Price Futures Group.
Crude was also aided by broader market strength with equities rising in the wake of a U.S. aid package.
U.S. benchmark crude futures have risen more than 6% so far this month amid optimism around the rollout of COVID-19 vaccines. Yet, the pandemic continues to rage worldwide and threaten demand. The virus is also making a comeback in Asia, with Thailand tightening restrictions and South Korea’s daily death toll rising to a record. Meanwhile, investors are also concerned with looming supply from OPEC+ in the new year.
Trading volumes for both benchmarks were below their average levels over the previous 10 sessions
The Bloomberg Dollar Spot Index fell as much as 0.4% on Dec. 29.
OPEC+ will meet next week to decide on production levels for February. The producer group is set to add another 500,000 barrels a day of output to the market from January, while Russia’s deputy prime minister has said the nation would support a further gradual increase in production in February.
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