(Bloomberg) — Oil steadied above $85 a barrel in London as a stronger dollar curbed investor appetite for commodities, offsetting signs of a tighter global crude market.
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Brent crude futures looked set to end the week little changed, after two days of losses erased gains notched up at the start of the week.
Global oil demand seems to be surpassing expectations, creating a bullish mood at the annual CERAWeek by S&P Global conference in Houston. Elsewhere, Indian refiners are refusing to take Russian crude carried on PJSC Sovcomflot tankers due to US sanctions, complicating a flow that helped contain prices.
Nonetheless, a dollar index is heading for its best week since January following a surprise rate cut from the Swiss National Bank, as well as weakness in China’s yuan, even after the Federal Reserve signaled lower rates remain on the cards this year. That’s a headwind for most commodities.
Crude has advanced in the first quarter amid declining US inventories, production cuts by the OPEC+ alliance and Ukrainian attacks on Russian refineries. Gasoline is showing signs of strength, with the profit margin for making the fuel from crude in the US near the widest since August.
However, gains have been limited by surging supply from outside OPEC+ and a muddled economic outlook in top importer China. A gauge of volatility for global benchmark Brent has sunk to a four-year low.
“Oil demand indeed looks stronger this year, but we struggle to see meaningful fundamental support to prices,” said Norbert Ruecker, head of economics at Julius Baer & Co. Ltd. “Prices should trend lower once the present upbeat mood cools.”
In the Middle East, Israel said it would invade Rafah no matter what the US says, potentially escalating regional tensions, as it battles Iran-backed Hamas in the Gaza Strip. The Houthis in Yemen — who have been targeting ships in the Red Sea for months to support Hamas — have assured China and Russia that their vessels wouldn’t be at risk.
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