Oil prices in the global market soared to their highest levels of the year on Friday, April 29, buoyed by lower US production and a weak dollar.
Brent crude was up 12 cents at $48.26 a barrel in afternoon trading, while US oil jumped 57 cents to $46.60.
US oil production has continued to fall in recent months, easing concerns about oversupply, while the dollar has lost almost 2% of its value against other global currencies in the past week.
A weaker US dollar typically contributes to a rise in oil prices, because oil is priced in dollars. When the dollar weakens against other currencies, oil becomes cheaper to buy, pushing up demand.
However, the latest rise in oil prices may be limited by a future increase in Middle East production, according to a note released by Deutsche Bank.
Iraq and the UAE are likely to raise production after maintenance issues are resolved, Deutsche indicated, and Saudi Arabia may also increase production significantly.
“A sustainable rise in OPEC production may be just around the corner, and… the rally may pause,” Deutsche analysts said.
The organization reported that low oil prices over the past two years have meant Venezuela’s government is running out of cash to keep its state-owned oil pumps operational.
Hamza Khan, senior commodity strategist at ING, said: “The issue is that we haven’t seen price rallies … correlate with fundamentals. The fundamentals – high stocks, high production – haven’t changed.”