Weak Dollar, OPEC+ Output Increase Issues Lift Oil Prices

The price of Brent crude increased by 43 cents or 0.7 per cent yesterday to $66.55 per barrel and the US West Texas Intermediate (WTI) crude soared by 52 cents or 0.8 per cent to $62.79 a barrel.

The US Dollar made a broad retreat on Thursday as investor gloom over the lack of any real progress towards defusing the US-China trade war reasserted itself.

A weaker US currency makes Dollar-priced commodities like oil less expensive for buyers using other currencies.

This came as several OPEC+ members suggest the group accelerate oil output increases for a second month in June. Kazakhstan, which produces about 2 per cent of global oil output and has repeatedly exceeded its quota over the past year, said it would prioritise national interest over OPEC+ in deciding production levels.

Market analysts noted that this may lead to Kazakhstan ceasing to exist as a member of OPEC+, although it remains in the alliance for now.

There have previously been disputes among OPEC+ members over compliance with production quotas, one of which resulted in Angola leaving the group in 2023.

Further disagreement between OPEC+ members is a clear downside risk, as it could lead to a price war.

In the US, the number of people filing for unemployment benefits rose marginally last week, suggesting a resilient labour market despite economic turbulence caused by tariffs on imported goods.

There were reports that businesses are increasing prices and cutting financial guidance due to higher costs stemming from US President Donald Trump’s trade war, which has also affected global supply chains.

US Federal Reserve officials indicated in television interviews they see no urgency to change monetary policy as they seek more information to determine how trade tariffs are affecting the economy.

China called for US tariffs to be cancelled on Thursday, that the White House would be willing to lower its tariffs on China to as low as 50 per cent to open up negotiations.

Also, the US and Iran will hold a third round of talks this weekend on a possible deal to re-impose restraints on Iran’s uranium enrichment programme. The market is watching for any sign that a US-Iran rapprochement could lead to an easing of sanctions on Iranian oil.