Oil futures traded higher Friday, on track for a monthly gain, as investors weighed an uncertain demand outlook, while bulls took encouragement from a slumping U.S. dollar.
West Texas Intermediate crude for September delivery was up 32 cents, or 0.8%, at $40.24 a barrel on the New York Mercantile Exchange, while October Brent crude, the global benchmark, added 23 cents, or 0.5%, to trade at $43.48 a barrel on ICE Futures Europe. WTI was on track for a monthly rise of more than 2%, while Brent was up more than 5% for July.
“Despite the resilient and rangebound nature of oil pricing over recent weeks, plateauing global demand and increasing OPEC+ output raises the question of whether the market can absorb additional barrels,” said Michael Tran, commodity analyst at RBC Capital Markets, in a note.
The Organization of the Petroleum Exporting Countries and its allies, a group collectively known as OPEC+, are set to relax output curbs by 2 million barrels a day beginning Saturday.
“Marginal barrels continue to find buyers but the outlook appears increasingly challenged and indication of upside potential to Norway’s Johan Sverdrup field beyond 470,000 barrels a day is yet another headwind,” Tran said.
Analysts said oil has been buoyed by a slump in the dollar, with the ICE U.S. Dollar Index, a measure of the currency against six major rivals, dropping to a more-than-two-year low as it tumbled 4.5% in July, on track for its biggest monthly decline since September 2010, according to FactSet.
Meanwhile, a firm tone in equities after blowout earnings from tech giants could also lend support for crude, analysts said.
“The rally in the tech space this morning is good for risk assets, with the crude oil market often correlating to a certain degree to equities,” said Robert Yawger, director of energy futures at Mizuho Securities U.S.A., in a note.
“The equity market is seen by some as a demand indicator for the crude oil market. I believe the correlation works more often than not, but it certainly comes and goes,” he said.