Oil continues rally, investors wary as dollar strengthens

Oil was up Wednesday morning in Asia, continuing a two-day rally driven by a cold snap in Texas, the US’s biggest oil-producing state, despite a strengthening dollar.

Brent oil futures were up 0.21% to $63.48 by 10:55 PM ET (3:55 AM GMT) and WTI futures inched up 0.07% to $60.09. Both Brent and WTI futures reversed some earlier losses and remained above the $60 mark.

The dollar was up on Wednesday, making oil priced in the greenback more expensive for buyers holding other currencies.

“Oil is trading lower via a stronger US dollar which is gaining a head of steam with US (treasury) yields ripping higher,” Axi chief market strategist Stephen Innes said in a note.

Capping oil prices, however, was the news that Norway, western Europe’s largest oil and gas producer, averted a strike and shutdowns of major offshore fields after operator Equinor reached a wage bargain with its oil workers.

However, investors had priced in a strike going ahead, as that has typically happened in the past few years, Rystad Energy analyst Paola Rodriguez-Masiu said in a note.

“Yet the strike was avoided …As a result, with oil supply unaffected, Brent gains had to be reversed to a certain extent,” the note added.

Oil supply also remains a concern in the U.S., where an unexpected cold snap has knocked out between 500,000 to 1.2 million barrels per day (bpd) of crude production in Texas’ Permian Basin.

Shale oil production has also reportedly been curtailed by anywhere from 2 million bpd to 3.5 million bpd, and it is estimated that around one-fifth of the country’s refining capacity has been knocked out.

The hit to production has also impacted the power supply. “This is one of the worst Mother Nature catastrophes I can ever remember while catching the oil complex wrong-footed at the supply levels,” Axi’s Innes added.

Investors await US crude oil supply data from the American Petroleum Institute, due later in the day.

First published on Investing.com