By Barani Krishnan
NEW YORK (Reuters) – Oil markets steadied on Thursday after scaling 2016 highs for a third day in a row on the back of a weak dollar as investors looked beyond record high U.S. crude inventories and relentless pumping by major producers to the prospect of future demand.
Oil prices have risen 75 percent in about three months or less since hitting 12-year lows of around $ 27 a barrel for Brent in late January and about $ 26 for U.S. crude in mid-February.
For April, the two benchmarks are up nearly 20 percent for their largest monthly gain in a year.
The rally, partly driven by the 6 percent drop in the dollar this year, has persisted despite U.S. crude stockpiles growing to all-time highs above 540 million barrels, according to government data on Wednesday.
Brent futures were up 36 cents at $ 47.54 a barrel by 10:49 a.m. EDT (1449 GMT), after setting a year-to-date high at $ 47.73.
U.S. crude’s West Texas Intermediate (WTI) futures rose 15 cents to $ 45.48, after hitting a 2016 high at $ 45.71.
“The market seems ‘invincible,’ and well supported my money flow,” said Scott Shelton, broker at ICAP in Durham, North Carolina.
The dollar fell half a percent, sliding for a fourth day in a row and to a two-week low against a basket of currencies. Declines in the dollar tend to make commodities denominated in the greenback, including oil, more attractive to holders of the euro and other currencies.
Many analysts believe the global glut in oil will ease from the second half of the year into mid-2017.
“The perception view crowd are starting to call the oil market rally the beginning of what will be a long bull market,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
“Clearly, the market is primarily focused on the forward supply-and-demand picture while continuing to push the bearish nearby fundamentals further into the background,” he said.
While U.S. oil production itself has fallen, imports of crude into the country have risen and a global oversupply looks set to grow as major exporters from Saudi Arabia to Russia and Iran ramp up output in a battle for market share.
Even so, analysts said oil near or above $ 50 a barrel could make drilling attractive again for U.S. shale producers, potentially creating unmanageable supplies that sparked the collapse from the $ 100 levels of mid-2014.
“Some producers are also likely to use the higher price level for hedging transactions, which would likewise prevent any future fall in production,” Commerzbank said.
(Additional reporting by Ahmad Ghaddar in LONDON and Henning Gloystein in SINGAPORE; Editing by Marguerita Choy)
