Oil rises as dollar falls, OPEC+ keeps output cut policy

February 02, 2023 (MLN): Oil prices rose on Thursday after tumbling in the previous session as a weaker dollar revived risk assets appetite and the OPEC+ decision to roll over an output cut helped ease oversupply concerns, as per Reuters.

Brent crude futures increased by 0.8% to $83.49 a barrel as of 0353 GMT, while West Texas Intermediate (WTI) U.S. crude futures moved up by 0.9% to $77.12 per barrel.

After US government data revealed big builds in crude and oil products inventory, both benchmarks plummeted more than 3% overnight.

Also, Federal Reserve raised its interest rate by 25bps on Wednesday, to arrest the inflationary pressure.

Yeap Jun Rong, Market Analyst at IG said, "Those hawkish reaffirmations from the Fed were met with rising doubts from the markets, which saw a dovish takeaway from Jerome Powell's acknowledgment of progress in the 'disinflationary process' and that he is not worried about loosening financial conditions."

“The U.S. dollar index dived to a fresh nine-month low on Thursday in reaction to the softer rate hike bets. A weaker greenback makes dollar-priced oil less expensive for holders of other currencies, boosting demand”, Reuters added.

Furthermore, an OPEC+ panel endorsed the oil producer group's current output policy at a meeting on Wednesday, leaving production cuts agreed upon last year in place amid hopes of higher Chinese demand and uncertain prospects for Russian supply.

OPEC+ has decided to cut production by 2 million barrels per day (bpd), about 2% of world demand, from November last year until the end of 2023 to support the market.

“EU countries will seek a deal on Friday on a European Commission proposal to set price caps on Russian oil products, after postponing a decision on Wednesday amid divisions between member states”, diplomats said.

“The European Commission proposed last week that from Feb. 5 the EU apply a price cap of $100 per barrel on premium Russian oil products such as diesel and a $45 cap per barrel on discounted products such as fuel oil”, Reuters added.

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