3 Min Read
NEW YORK (Reuters) - Oil prices rose on Tuesday, driven by a weak dollar and expectations that U.S. crude supplies could have fallen last week for a fifth straight week.
But the American Petroleum Institute (API) estimated an inventory build instead, in a report released after the market's settlement, causing oil to pare some of its earlier gains.
API said U.S. crude inventories rose by 1.8 million barrels in the week to May 29. Analysts polled by Reuters had forecast stocks would drop by 1.7 million barrels, for a fifth straight week of declines.
The government-run Energy Information Administration will issue official inventory data on Wednesday.
Brent crude oil settled up 61 cents, or 1 percent, at $65.49 a barrel. It was up 44 cents by 4:56 p.m. EDT, after the API data.
U.S. crude settled up $1.06, or 1.8 percent, at$61.26. It traded 81 cents higher after the data.
The likelihood of high global supplies from OPEC's lack of will to cut output when it meets this week was also a factor in Tuesday's market, although it did not have a significant impact on prices, traders said.
The weaker dollar was a bigger factor as it made crude prices, denominated in the greenback, more affordable to holders of the euro and other currencies. The euro was up its most against the dollar since mid-March on bets that Greece would reach a deal with its creditors.
"It's a dollar driven day, with as much expectations riding on a continued draw in crude stocks," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Ministers from the Organization of the Petroleum Exporting Countries, responsible for more than a third of the world's crude output, meet in Vienna on Friday to decide on production policy for the next six months.
The group has been producing up to 2 million barrels per day more than needed, although analysts expect the market to eventually balance from higher demand.
Ali al-Naimi, oil minister of Saudi Arabia, OPEC's most influential member, expects global oil demand to increase in the second half and supply to decrease, a sign the kingdom's strategy of defending market share was working.
Several banks and analysts, including Morgan Stanley, have suggested OPEC could raise its production target, acknowledging that it has been producing more than planned over the last few months. But most expect no change.
"The gulf between the member countries remains extremely wide, and without a contribution from everyone ... Saudi Arabia will not reduce production," said Amrita Sen, chief oil analyst at Energy Aspects.
Additional reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Andre Grenon and Richard Chang