Crude prices continued to rise despite a strong dollar and the US government has forecast that its domestic crude production will rise more than expected a year ago, as the continuing Yemen crisis poses near-term supply challenges.
Brent crude for spot delivery jumped to $60.96, its highest since 6 March, and from the previous close of $60.16. The commodity had a 3.9% jump on Tuesday also helped by the weakness in the US dollar after retail sales data disappointment.
A report from the US state North Dakota on Tuesday showed that oil production from there fell 15,000 barrels per day in February versus January's output even though the number of producing wells hit a record high.
The US government on Tuesday said domestic crude production will rise even more than expected a year ago, and will peak at 10.6 million barrels per day in 2020, a million barrels more than the high forecast a year earlier.
Crude production will then moderate to 9.4 million bpd in 2040, 26% more than expected a year ago, the agency said.
Fighting in Yemen raised concerns about security of oil shipments from the Middle East. Analysts worry a proxy war might break out on the Arabian peninsula, home to the world's biggest oil fields, if the conflict draws in Saudi Arabia and rival Iran, a Reuters report showed.
The USD index has rebounded to 99.05 from the previous close of 98.75, further distancing from Tuesday's intra-day low of 98.37, which was a three-day low. The index ended the previous session 0.77% down, falling off the near-one-month high of 99.99 touched on Monday.
The rise in oil prices has strengthened its upward swing in mid-March when it hit a six-week low of $52.55. The prices are now 16% up and on track to continue the broader upward trend that began in mid-January when the immediate delivery Brent was as low as $45.16.
The commodity has its next upside target at $62.97, the high it hit on the first leg of gains from the six-year low of last month. The next level will be $62.0 and then $73.0. However, only a move above the $80 mark will significantly reverse the big slump since June last year.
On the downside, immediate near term levels to watch are $52.55 and $51.38 ahead of $45.16. A break below that will lead to another rout of free fall in the commodity aiming levels like $40 and then $33.73, the 2008 low. Levels below that will take Brent to its lowest since 2004.
However, the big picture of the commodity still keeps an upward bias, given the trend dates back to 1998. Only a break below $40 will weaken that trend noticeably.