Oil prices rose a dollar a barrel on Tuesday as the U.S. dollar index fell to its lowest in over a week and as oil investors shifted focus away from geopolitical issues in the Middle East to the state of global economies.
Brent crude futures rose $1.29, or 1.5%, to $88.29 a barrel by 2:00 p.m. ET (1800 GMT). U.S. West Texas Intermediate crude futures rose $1.32, or 1.6%, to $83.22 a barrel.
The U.S. dollar index weakened after S&P Global data showed U.S. business activity cooled in April to a four-month low on weaker demand. A cheaper greenback typically lifts demand for dollar-denominated oil from investors holding other currencies.
More support for prices came from Euro Zone data that showed business activity expanding at the fastest pace in nearly a year this month.
“The market has been under pressure from little to no growth out of the Euro Zone, so anything showing improvement should be supportive,” said Andrew Lipow, president of Lipow Oil Associates.
Market participants are looking past geopolitical disruptions to focus on economic indicators and overall supply and demand balances, Lipow added.
Both contracts had dropped by more than a dollar early in the session on easing tensions between Israel and Iran, along with nagging concerns on demand from top oil importer China.
“On one hand there are still lingering doubts about the performance of China’s economy, while on the other is an overriding sentiment that OPEC will hold firm on its price supportive actions,” said Gaurav Sharma, an independent oil analyst based in London.
Investors are awaiting U.S. gross domestic product figures and March personal consumption expenditure data, the Fed’s preferred inflation gauge.
“A low GDP number of under 3% could cool the Fed’s nerves some and provide less pressure to commodities,” said Alex Hodes, oil analyst at brokerage firm StoneX. “However, a stronger than 3% reading could cause the dollar to rally further, which would put more pressure on commodities.”
U.S. crude oil inventories are expected to have increased last week while refined product stockpiles are likely to have fallen, a preliminary Reuters poll of analysts showed.