Crude closed at a three-week high as booming stock markets stoked optimism about economic growth that drives energy demand.
Crude futures rose 0.6 percent in New York. Blue-chip stocks reached a level not seen since the start of this month and the dollar retreated from earlier gains, boosting oil’s appeal as a store of value. Prices flirted with the $64-a-barrel mark against the backdrop of Saudi Arabian Energy Minister Khalid Al-Falih’s weekend remarks about phasing out production caps that have been in effect since late 2016.
“Equities ripping a bit is the most important element there is the relative correlation to equities today, the correlation to risk assets,” Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York, said by telephone.
Oil in New York has advanced about 8 percent in the past two weeks as production curbs by the Organization of Petroleum Exporting Countries and allies such as Russia drained a global glut. Front-month futures contracts will trade at a premium to later-dated ones, a condition known as backwardation, for two to three years, Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, said in a Bloomberg Television interview.
WTI for April delivery rose 36 cents to settle at $63.91 a barrel on the New York Mercantile Exchange after earlier dipping to $63.06. Total volume traded was about 31 percent below the 100-day average.
Brent for April settlement added 19 cents to end the session at $67.50 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $3.59 premium to WTI.
After climbing as much as 0.2 percent, the Bloomberg Dollar Spot Index retreated to a 0.05 percent gain.
With bloated inventories shrinking, the next step for major producers will be phasing out the caps, Al-Falih said in New Delhi. The production curbs may be eased “sometime in 2019, but we don’t know when and we don’t know how,” he said.