Nymex crude oil futures breached key resistance at $50 a barrel Thursday, surging to its highest level since December as the U.S dollar was weakened by news the U.S Federal Reserve will buy back debt
"(Crude) started to get stronger from the gold market earlier in the day and has broken some resistance levels, the weaker dollar is also a contributing factor," said Christopher Bellew broker at Bache Commodities. US dollar depreciation supports crude prices and other dollar-denominated commodities, Bellew added the Nymex crude contract has also shown stronger signs of recovery since moving back to trade at a premium against the ICE Brent front-month contract.
At 1137 GMT, the front-month May Brent contract on London's ICE futures exchange was up $2.13 at $49.79 a barrel.
The front-month April contract on the New York Mercantile Exchange, which expires Friday, was trading $2.24 higher at $50.39 a barrel, after briefly hitting $50.48/bbl its highest level since December 1.
The ICE's gasoil contract for April delivery was up $24.50 at $427.50 a metric ton, while Nymex gasoline for April delivery was up 446 points at 141.03 cents a gallon.
The market has survived a no-cut decision from the Organization of Petroleum Exporting Countries, followed by a bearish set of data on U.S stocks from the Energy Information Administration this week.
Oil prices have come out the other side stronger to break the psychologically important $50 a barrel level, and are now "thriving on (higher) U.S stock markets and a weaker dollar," said an oil analyst at PVM.
During U.S hours a steep decline on EIA data was quickly reversed by news the Federal Reserve will buy up to $300 billion of bonds as part of a quantitative easing strategy, in a further attempt to drive rates lower. The U.S dollar weakened sharply in response and continues to push oil prices higher Thursday.
"Thanks to the Fed announcement, the bulls were thrown something of a lifeline," said MF Global analyst Edward Meir. "Whether Wednesday's advance now extends into the balance of the week remains to be seen."
The energy agency report revealed a higher-than-expected 2 million barrel increase in U.S. crude inventories last week, which could largely be attributed to falling refinery runs.
This may not be at all surprising in the middle of refinery maintenance season and ahead of U.S driving season, but utilization levels are well below the five-year moving average for this period and down on last year's levels, said VTB analyst Andrey Kryuchenkov.
Gasoline stocks also surprised, jumping 3.2 million barrels and countering expectations for a decline.