Oil prices steadied on Thursday, firming as the dollar weakened, though OPEC and Bank of America Merrill Lynch reduced forecasts of demand for its oil this year. Oil and other commodities are priced in dollars and are likely to gain when the U.S. currency declines.
Brent crude was up 65 cents a barrel at $49.34 a barrel by 1240 GMT, at a small premium to U.S. crude, which was trading at $49.25 a barrel, up 67 cents. Earlier in the day the North Sea crude oil contract slipped below U.S. crude, reflecting a very weak seaborne spot oil market.
The greenback dropped against a basket of major currencies after the Swiss National Bank abandoned a three-year-old cap against the euro, pushing the Swiss currency up sharply and depressing the euro and the dollar. Dollar weakness provided some relief from what was otherwise an overwhelmingly negative picture for oil.
In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast demand for the group's oil would drop to 28.78 million barrels per day (bpd) in 2015, down 140,000 bpd from its previous expectation.
The cartel also reduced its projection for the rate of growth in non-OPEC supply partly due to a slowdown in the U.S. shale boom.
"As drilling subsides due to high costs and a potentially sustained low oil price, production could be expected to follow, possibly late in 2015," the organization said.
However, OPEC still expects U.S. oil production to increase by almost 1 million bpd even with the much lower oil prices.
Iraq plans to boost monthly crude oil exports from its southern ports to a record high level in February, trade sources said on Thursday.
Iraq's State Oil Marketing Organization has allocated 3.3 million barrels per day (bpd) of Basra crude to be shipped out in February, up from 2.7 million bpd in January, they said, citing a preliminary loading program.
On Thursday U.S. investment Bank of America Merrill Lynch also lowered its oil forecasts saying that Brent could go as low as $31 by the end of the first quarter of 2015.
"Implied volatility has continued to increase at an alarming speed," said the bank in a weekly report.
Brent surged 4.5 percent on Wednesday, its biggest percentage gain since June 2012, as traders covered themselves on expiring options.
