By Adedapo Adesanya
The Brent crude rose to the $56 mark on Tuesday, posting further gains following a rush by investors due to a weaker dollar, which pushed it higher by 87 cents or 1.56 per cent to trade at $56.53 per barrel.
On its part, the United States’ crude benchmark, West Texas Intermediate (WTI) crude futures, grew by 1.7 per cent or 89 cents to trade at $53.14 per barrel.
Yesterday, the Dollar weakened, raising the appeal for commodities priced in the currency. The drop in the value makes the commodity better for holders of other currencies since it is the currency for trading oil.
Oil has been bullish recently after the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed to keep curbing their output, building on a rally at the end of last year amid optimism on COVID-19 vaccine breakthroughs.
Record cuts by OPEC and its allies last year helped oil recover from historic lows in April. Although the quota has been gradually reduced, Saudi Arabia, the de facto leader of the cartel, plans to cut output by an extra 1 million barrels per day in February and March to stop inventories from building up.
Also supporting the market was the rekindled hopes of more economic stimulus as Democrats are set to take over power in the United States. President-elect, Mr Joe Biden, who takes office on January 20, has promised trillions in extra pandemic-relief spending.
The market is expected to keep its gains as there are expectations of a drop in US crude stockpiles. Analysts expect crude inventories to fall by 2.7 million barrels for a fifth straight week of declines.
The American Petroleum Institute (API) will report its own estimate and this will be backed up by the more trusted, government-owned Energy Information Administration (EIA) on Wednesday.
Oil price gains were capped by demand concerns as coronavirus cases rise around the world. So far over 90 million cases have been recorded globally.
Chinese authorities introduced new curbs in areas surrounding its capital, Beijing on Tuesday and Japan is to widen a state of emergency beyond Tokyo.