LONDON – Oil rose above $43 a barrel to its highest level so far in 2016 on Tuesday, supported by hopes that a meeting of oil producers will agree steps to tackle a supply glut, a weak U.S. dollar and further signs of strong demand in China
Many members of OPEC plus outside producers are meeting in Doha, Qatar, on Sunday to discuss freezing output. The dollar fell earlier on Tuesday to its lowest in nearly eight months against a basket of currencies
, before recovering.
was up 59 cents at $43.42 a barrel at 1328 GMT, having earlier in the session scaled to a high for this year of $43.58. U.S. crude rose 37 cents to $40.73.
"The weak dollar is one important reason," said Eugen Weinberg of Commerzbank. "Also, the fact that we are above $40 and at multi-month highs is also contributing to the price increase as it is prompting some speculative buying."
Senior Iraqi oil official Falah Alamri said he was confident the Doha meeting would result in a deal to freeze output, which would signal that prices have bottomed out. Brent hit a 12-year low close to $27 in January.
A rise in vehicle sales in China, the world's second-biggest oil consumer, and a plan by oil and gas workers in Kuwait to go on strike on Sunday in a government pay dispute, also lent support.
Oil prices have collapsed from above $100 in mid-2014 due to oversupply. The Organization of the Petroleum Exporting Countries' decision in November 2014 to abandon its traditional role of cutting output helped deepen the decline.
In a sign that oversupply may be easing, the structure of the Brent crude market has strengthened and the discount at which the first-month contract is trading to the second - known as contango - has narrowed significantly.
On the charts, Brent and U.S. crude are approaching resistance at the 200-day moving average, which stands at $43.53 for Brent. A move above this, plus the narrowing Brent contango, could lead to further gains.
"Under those conditions, if the 200-day moving average is broken, we expect to see more speculative flows coming into crude oil," said Olivier Jakob, analyst at Petromatrix.
Crude gained a boost last week with news of a surprise decline in U.S. inventories from a record high. But this week's U.S. supply report is expected to show an increase in stocks. –Reuters