Oil Prices Inch Up on Weaker Dollar

Crude oil prices rose Tuesday as the dollar weakened after an imminent increase in U.S. interest rates became less likely.

Global crude benchmark Brent's August contract was up 0.28% to $50.31 a barrel, while its U.S. counterpart, West Texas Intermediate, was up 0.26% at $49.81 for July deliveries.

The weak dollar is dominating the oil agenda after Friday's disappointing employment data from the U.S. offered a tailwind to prices. However, gains were tempered by Federal Reserve Chairwoman Janet Yellen's statement Monday that she still expects gradual interest rate increases this year.

Recent price gains could also become self-defeating, as they motivate increased production.

At $50 a barrel, the oil price could revive some shale oil drilling, according to Norbert Rucker, head of commodities research at the Swiss bank Julius Baer. In a note, the analyst said that last week's uptick in U.S. rigs in operation could be the first sign that production is slowly starting to stabilize. The analyst remained cautious, however.

"The big picture is unchanged," said Mr. Rucker. "Sluggish global growth, abundant supplies and persistent cost deflation should keep a lid on commodity prices longer-term."

But production remains challenged in key regions. In Nigeria, a group calling itself the Niger Delta Avengers, which has been bombing pipelines, vowed on its purported Twitter account to reduce the country's production to zero.

The campaign by the group has taken as much as 1 million barrels a day of Nigerian supply out of the market, meaning that Angola has now replaced the country as Africa's leading producer.

The American Petroleum Institute releases its weekly inventory forecasts today ahead of Wednesday's official data from the Energy Information Administration. Michael Poulsen, oil risk manager from Copenhagen-based Global Risk Management, said the consensus is a 3.5 million barrel fall in crude oil inventories.

Other factors that could affect U.S. oil prices this week include tropical storm Colin in the Gulf of Mexico, which is reportedly picking up speed but hasn't affected offshore oil infrastructure in the area as yet.

Nymex reformulated gasoline blendstock for July—the benchmark gasoline contract—was up 0.3% to points to $1.59 a gallon, while July diesel traded at $1.51, 0.69% higher.

ICE gas oil for June changed hands at $444.25 a metric ton, down $0.75 from Monday's settlement.

Jenny W. Hsu contributed to this article.

Write to Kevin Baxter at Kevin.Baxter@wsj.com

(END) Dow Jones Newswires

June 07, 2016 08:35 ET (12:35 GMT)

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