Oil rose 2 percent on Thursday, heading for its largest weekly gain in a month, after a surprisingly large drop in U.S. crude inventories emboldened investors ahead of next week’s meeting between OPEC members and Russia to discuss supply.
A fall in the dollar against a basket of currencies to a two-week low further underpinned the market.
Brent crude futures rose 95 cents to $47.78 a barrel by 1345 GMT, up 4.3 percent so far this week and set for the largest one-week rise since mid-August. U.S. oil futures rose $1.09 to $46.43 a barrel.
The U.S. Energy Information Administration on Wednesday reported a 6.2-million-barrel drop in crude oil inventories last week, the second-biggest fall in a year.
The drawdown, along with a more benign outlook for U.S. monetary policy, overshadowed news that Russian oil output hit a new record above 11 million barrels per day this week and that Libya had exported its first oil cargo since at least 2014 from the port of Ras Lanuf.
“In a way, this strength is justified,” PVM Oil Associates strategist Tamas Varga said.
“It is also justified because of the upcoming informal OPEC meeting and it’s only logical that a few days before that meeting, shorts will start covering and yesterday’s stock figures provided the perfect excuse,” he said.
Oil got an additional lift from a drop in the dollar to its lowest against the yen in four weeks after the U.S. Federal Reserve kept monetary policy unchanged and signalled rates may rise more slowly than it had previously expected.
A weaker dollar makes energy imports cheaper for oil-reliant nations, while low U.S. rates mean credit will remain easier to obtain.
Next week, the world’s largest producers will gather in Algiers to discuss ways to stabilise the oil market, including a potential freeze in output.
Analysts are not attaching a high chance to a deal materialising and, even if it did, whether it would help clear the global overhang of crude supplies.
With global production still higher than consumption, analysts are looking for prices to remain broadly range-bound.
“In a world of continued (U.S.) shale productivity gains that cause other oil-producing regions around the world to become highly focused on cost competitiveness, we believe investors and companies should prepare for an environment of range-bound oil prices,” Goldman Sachs said in a note to investors published late on Wednesday.