Oil rises as dollar drops

brent-slips-below07 June 2013, News Wires – UK Brent futures posted light gains to hold above $103 a barrel on Friday, supported by a sharp fall in the dollar and expectations the Federal Reserve will stick with its stimulus, setting the contract on course for the biggest weekly gain since late April.

Brent crude gained 13 cents to $103.74 a barrel early on Friday, while US oil rose 5 cents to $94.81. Both contracts are set for their biggest weekly gain since the week ended 26 April, with the European benchmark poised to rise 3.3% and its US counterpart 3%.

A drop in the US currency supported oil prices with the dollar index hitting three-month lows in the previous session and remaining weak in Asian trade.

“Investors should look at dollar trades more than supply-demand factors for oil,” said Tetsu Emori, a commodity fund manager with Astmax Investments in Tokyo.

“In the long-term I agree that the dollar will strengthen as the Fed rolls back stimulus, but for now the dollar seems overbought and we are seeing some unwinding of positions.”

For Brent, $100 is a key support level and $105 an important psychological resistance, Emori said. The trading range for US oil will be between $93 and $95 a barrel, with $98 providing the next key resistance, he said.

The Fed’s policy-setting committee meets 18-19 June. With data ranging from manufacturing to consumer spending showing the economy hit a soft patch early in the second quarter, it is unlikely the US central bank will announce a tapering of the $85 billion in bonds it is buying each month at that meeting.

Brent was also supported by news that the Buzzard oilfield in the UK North Sea has suffered a production outage, the second in less than a week. Buzzard had restarted earlier this week following an equipment failure. The field’s normal production is about 200,000 barrels per day.

Brent faces a resistance at $103.98, a break above which will make a target at $105.31 available, while US oil is expected to test a resistance at $95.68, according to Reuters technical analyst Wang Tao.

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