Oil ticked up on Thursday on strong U.S. economic data, falling inventories and the OPEC+ decision to stick to its output cuts, but a stronger U.S. dollar limited the gains.
Brent crude settled at $58.84 a barrel, up 38 cents, having earlier hit its highest level since Feb. 21 at $59.04.
U.S. West Texas Intermediate (WTI) crude settled at $54 a barrel, rising 54 cents after reaching its highest settlement level in a year on Wednesday at $55.69.
Strong U.S. factory data and improving unemployment numbers helped boost oil prices, said John Kilduff, partner at Again Capital in New York.
“That helped, and given the broader situation with OPEC+, I would expect for this market to tighten up further,” Kilduff said.
The U.S. Commerce Department said factory orders increased 1.1% after surging 1.3% in November, beating economists’ expectations, while Labor Department data showed a drop in Americans filing new applications for unemployment benefits in the latest week. Investors were also expecting positive data from the government’s comprehensive monthly employment report due on Friday.
The market was further bolstered by news that Democrats in the U.S. Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion coronavirus aid plan.
A rallying U.S. dollar, which typically moves inversely with oil prices, took some of the steam out of oil’s momentum. The dollar hit more than a two-month high against a basket of other currencies.
On Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and allies – known as OPEC+ – extended its oil supply pact at existing levels, suggesting that producers are happy the cuts are draining inventories while uncertainty remains over the outlook for a recovery in demand as the COVID-19 pandemic lingers.
A document seen by Reuters on Tuesday showed that OPEC expects output cuts to keep the market in deficit throughout 2021, even though the group reduced its demand forecast.
Also on Wednesday, government data showed that U.S. crude oil stockpiles last week unexpectedly fell to 475.7 million barrels, their lowest level since March.