Oil Prices Notch Fifth Day of Gains

Oil prices rose for a fifth straight day Friday, as the U.S. dollar weakened and investors focused on signs of an easing supply overhang.

U.S. crude futures settled up 46 cents, or 1%, to $46.54 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 49 cents, or 1.01%, to $48.91 on ICE Futures Europe.

The dollar tumbled on Friday after U.S. data showed that inflation was flat in June from the prior month. The figures were the latest sign that U.S. inflation remains soft, which could be an obstacle for the Federal Reserve's plans to raise interest rates. The WSJ Dollar Index slid 0.67%, to 87.32.

A weaker dollar makes dollar-traded oil cheaper for foreign buyers, often causing oil futures to rise.

The dollar has taken a back seat to concerns about a global oil glut in recent months, but analysts said the dollar's fall Friday helped lift oil prices.

"If the dollar continues to weaken, it's pretty bullish for oil," said Bill O'Grady, chief market strategist at Confluence Investment Management. "The focus has been on [the Organization of the Petroleum Exporting Countries] and inventories -- that's perfectly legitimate. But we will occasionally see these periods where it's all about the dollar -- we may be heading into one of those."

U.S. crude futures ended the week up 5.22%. They have been climbing in recent days as investors have been encouraged by recent data showing large weekly declines in U.S. oil stockpiles. Price rose again Thursday after the International Energy Agency said demand is accelerating.

The rally hasn't put oil anywhere near the $60 mark that many had predicted it would be on its way to by now, but it does show that investors may believe the lows the market hit at $42.53 in June were likely the bottom for the time being.

Prices also perked up in earlier trading after Royal Dutch Shell's unit in Nigeria declared a force majeure on Bonny light crude exports from Nigeria, following a pipeline shut down.

Rising output in Nigeria and Libya, two members of the Organization of the Petroleum Exporting Countries exempt from the group's production cut agreement, has been one of the factors keeping oil prices from climbing higher.

But some investors remain focused on the global glut of oil.

Gene McGillian, research manager at Tradition Energy, said he expects prices to continue pivoting around the $45 mark unless there are additional drops in U.S. storage inventories or further indications that summer driving season is ramping up.

"At these levels, we find out whether people believe the global supply demand balance is tightening," he said.

In its report, the IEA also noted that OPEC members are slipping in their compliance with an agreement to curtail output. OPEC last year teamed up with 10 other big producers outside the cartel -- including Russia -- to cut production through March by roughly 1.8 million barrels a day from the record levels reached last October.

The market is only "a little bit more balanced," said Tom Pugh, a commodities economist at Capital Economics. "We have gone from extremely bearish to quite bearish," he added.

The IEA's more robust demand outlook is supported by China's endless thirst for foreign crude. In the first half of 2017, it imported an average 8.6 million barrels a day, 18% more than the start of last year. The country has become the world's leading energy importer, followed by the U.S.

China market watchers say the uptrend should persist as the government aims to expand its strategic petroleum reserve.

"It is hard to draw a conclusion that the bull market is back, but recent trends suggests the market is tightening -- even though at a slower pace than previously thought," said Grace Liu, the head of petrochemical research at Guotai Junan.

Gasoline futures rose 3.44 cents, or 2.25%, to $1.5605 a gallon. Diesel futures rose 2.33 cents, or 1.56%, to $1.5150 a gallon.

Write to Alison Sider at alison.sider@wsj.com, Christopher Alessi at christopher.alessi@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

July 14, 2017 16:28 ET (20:28 GMT)