Oil climbed in Asia Wednesday after Federal Reserve boss Janet Yellen’s cautious remarks on the US economy weakened the dollar and traders nervously await Britain’s vote on its future in the European Union.
Traders are also waiting for the release later in the day of official US stockpiles data, hoping for an idea about demand in the world’s top oil consumer, after an industry group said supplies had tumbled last week.
Yellen warned Tuesday the US economy faces “considerable uncertainty” from slower domestic activity and from a possible British vote to exit the EU, signalling that a hike in US interest rates may be some time off.
She said she wants the economy to be on a “favourable path” before the central bank raises borrowing costs, which sent the greenback tumbling.
A weaker dollar makes oil cheaper for anyone using other currencies.
Markets have been particularly volatile in the week leading up to Britain’s EU vote Thursday. While bookmakers say there is an 80 per cent chance Britain will stick with the EU, opinion polls predict a dead heat, with about 10 per cent of voters yet to decide which way to go.
“A UK vote to exit the European Union could have significant economic repercussions,” Yellen warned in a testimony to the Senate Banking Committee.
At about 0340 GMT Wednesday, US benchmark West Texas Intermediate for August delivery, a new contract, was up 28 cents, or 0.56 per cent, at $50.13, while Brent gained 24 cents, or 0.47 per cent, to $50.86.
Stephen Innes, senior trader at foreign exchange firm OANDA Asia Pacific, said oil prices “are being dictated by the US dollar movement”.
The US energy department is due to release its weekly stockpiles figures on Wednesday, a day after the American Petroleum Institute showed a larger than expected drop. The figures are pored over by traders hoping for a guide to demand in the crude market during the US driving season.