Oil jumps on dollar, demand Projection

Oil prices jumped on Tuesday as a weak dollar lifted commodities denominated in the currency and OPEC slightly raised its forecast for world oil demand growth.

Violence in Yemen also boosted oil prices, raising concerns over the security of Middle East crude supplies.

The dollar fell on bond market gyrations, making oil and other commodities priced in the greenback more affordable to holders of the euro and other currencies.

The Organisation of the Petroleum Exporting Countries (OPEC) tweaked its 2015 world oil demand growth forecast to 1.18 million barrels per day, above a previous estimate of 1.17 million barrels.

Saudi-led air strikes aimed at Iran-allied Houthis hit on a rocket base in Yemen capital Sanaa, killing 90 people and wounding 300 ahead of a five-day truce set to begin later Tuesday. While Yemen is a marginal oil producer, its proximity to shipping lanes has raised concerns over supply routes.

US crude futures were up $1.40 at $60.65 a barrel by 11:42am EDT (1542 GMT).

North Sea Brent futures, a more widely used benchmark for oil, were up $1.70 at $66.61.

Oil had its strongest monthly advance in six years in April, rising up to 25 percent on signs that a global glut was easing. Since May began, however, the market has been beset with volatility on signs that higher prices were again encouraging production.

“The market is really torn between wanting to be on the bullish side when you have a weaker dollar and geopolitical situations like today, and staying in accordance with fundamentals, when there’s already a deluge of West African crude barrels out there without buyers,” said Andrew Lipow, president of Houston-based Lipow Oil Associates.

The market will be looking out later in the day for US oil stockpile estimates for last week from industry group American Petroleum Institute. A Reuters poll estimated a crude stock drawdown of 100,000 barrels on average in the week to May 8.

Saudi Arabia pumped 10.308 million barrels per day in April, a Gulf industry source told Reuters, compared with 10.29 million bpd in March.

Iraq plans to export a record volume of crude oil from its southern ports in June, trade sources said.

Goldman Sachs said in a note that it viewed the recent oil rally as “premature” and crude prices as “expensive relative to current and forecast fundamentals.”