Oil Trades Near $40 as Dollar Weakens Amid Falling U.S. Output

Oil traded near $40 a barrel as the dollar declined amid signs central banks will continue to provide economic stimulus and U.S. crude output dropped to the lowest level since November 2014.

Futures were little changed in New York after climbing 4.5 percent Thursday. The Bloomberg Dollar Spot Index held near the lowest level since June after the Federal Reserve scaled back expectations for the pace of interest-rate gains. U.S. production slid through March 11 and stockpiles expanded by 1.32 million barrels, the smallest reported gain in five weeks, according to an Energy Information Administration report on Wednesday.

“The Fed decision and the U.S. dollar weakness has helped commodities as a whole and oil has benefited from that,” Angus Nicholson, an analyst at IG Ltd. in Melbourne, said by phone. “The EIA report was very solid with a smaller than expected gain in crude inventories and a cutback in U.S. production. Still, prices are approaching levels where a number of swing producers start becoming profitable again.”

Oil is set for the longest run of weekly gains since May amid speculation stronger demand and shrinking U.S. crude production will ease a global glut. Declines in shale output are contributing more to the rise in prices than talks between major crude-exporting nations on a potential production freeze, according to head of the International Energy Agency.

West Texas Intermediate for April delivery was at $40.10 a barrel on the New York Mercantile Exchange , down 10 cents at 8:57 a.m. Hong Kong time. The contract added $1.74 to $40.20 on Thursday, the highest Settlement since Dec. 3. Total volume traded was about 4 percent above the 100-day average. Prices are 4.2 percent higher this week, heading for the fifth weekly gain.

Brent for May settlement was 21 cents lower at $41.33 a barrel on the London-based ICE Futures Europe exchange. The contract climbed $1.21 to $41.54 Thursday, the highest close since Dec. 4. The global benchmark crude was at an 18-cent discount to May WTI.

--With assistance from James Paton To contact the reporter on this story: Ben Sharples in Hong Kong at bsharples@bloomberg.net. To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Aaron Clark, Sungwoo Park

By: Ben Sharples

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