Crude oil futures rose around half a dollar on Wednesday and remained near 2016 highs on the back of strong investor sentiment and a weak dollar, although analysts warned this month’s bull-run could soon run out of steam.
International Brent crude futures were trading at $46.31 per barrel at 2.53 a.m. ET, up 57 cents, or 1.25 percent from their last settlement.
Brent received extra support from reports that Saudi Arabia and Kuwait appear no closer to restarting their jointly operated Khafji oilfield, which produced 280,000 to 300,000 barrels per day (bpd) before environmental problems forced a planned 18-month closure in October 2014.
U.S. West Texas Intermediate (WTI) crude was up 51 cents, or 1.16 percent, at $44.55 a barrel.
WTI was further bolstered after the American Petroleum Institute (API) reported a draw of nearly 1.1 million barrels in U.S. crude inventories last week versus analysts’ expectations for a 2.4 million-barrel build in a Reuters poll.
Brent and WTI were near respective 2016 highs of $46.49 and $44.83 hit in the previous session.
Beyond strong investment appetite from financial traders, analysts said crude was being lifted by a falling dollar, which has shed 5 percent in value against a basket of other leading currencies since the beginning of the year.
A weak dollar makes fuel imports cheaper for countries using other currencies, potentially spurring demand.
BMI Research said that it expected “China’s crude oil imports will remain strong over the short-term,” driven by strong demand from independent refineries and continued filling of its strategic petroleum reserves.
“A weaker U.S. dollar and expectations of stronger fundamentals drove crude oil prices higher. Sentiment continues to improve, with major producer BP suggesting the markets may rebalance by the end of the year,” ANZ bank said on Wednesday.
The bank still warned that the steep gains seen this month might “test investors’ bullish resolve this week.”
With prices up by around a quarter from April’s lows and by more than two-thirds from their lowest levels for 2016 so far, traders with long positions at some point will be tempted to sell and lock in the profit.