Oil bounces back as dollar weakens

LONDON: Brent oil futures rose to US$ 56 a barrel on Thursday, as a weakened dollar and industry spending cuts offset worries of a supply glut after U.S. crude inventories increased for a fifth consecutive week.

The dollar fell 0.25 percent against a basket of currencies , making dollar-traded commodities such as oil more attractive.

“The dollar is weaker against all the commodities at the moment,” said Michael Hewson, chief analyst at CMC Markets.

“We saw a heavy selloff in commodities yesterday and I think that’s why we’re getting a little bit of a rebound in oil prices on the back of that.”

March Brent futures were up US$ 1.38 at US$ 56.04 a barrel by 0938 GMT (04:38 a.m. EST), following a 3 percent loss in the previous session that saw prices break below US$ 54 at one point.

U.S. March crude futures were trading up US$ 1.58 at US$ 50.42, after falling more than 2 percent in the previous session.

French oil major Total announced on Thursday that it would increase cuts to operational costs to US$ 1.2 billion this year while spending 30 percent less on exploration, to cope with weaker oil prices.

Brent prices have gained as much as 30 percent from a mid-January low of US$ 45.19 but the benchmark has been pulling back this week as evidence of a continuing glut mounts.

U.S. crude stocks rose to a record weekly high last week, while gasoline stocks increased and distillate inventories fell, data from the Energy Information Administration showed on Wednesday.

“(The rise in prices) is quite surprising,” said Carsten Fritsch, an analyst at Germany’s Commerzbank. “Prices have dropped sharply in the last two days so it may be a bounce back from that, but the decline was more than justified.”

On Wednesday, Saudi Arabia’s oil minister met the chairman of Russian state-controlled energy giant Gazprom , Saudi state media said, and discussed cooperation between oil producers belonging to the Organization of the Petroleum Exporting Countries and non-members such as Russia.

Meanwhile, Ukrainian peace talks on Wednesday were met by a surge of fighting. Washington is openly talking of arming Ukraine to defend itself from “Russian aggression”, raising the prospect of a proxy war in the heart of Europe between Cold War foes.

Elsewhere, Saudi Arabia will keep March crude supply to Asia steady, industry sources told Reuters.

(Additional reporting by Adam Rose in Beijing; Editing by Dale Hudson)

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