Oil edges towards $51 a barrel

Prices for Brent crude edged towards $51 on Wednesday (August 5th), rising above the key support level of $50.

This marked the second day of increases, as investors wait patiently for data concerning US oil inventories, to give them an indication of current supply levels. A glut caused prices to shave off 20 per cent of their value in July.

Prices for September Brent crude gained 62 cents by 06:29 BST to $50.61 per barrel, after adding one per cent during trading yesterday, pushing it up from Monday's six-month nadir. US crude added 54 cents taking prices to $46.28, helping it to recover from the four-month low it hit at the start of the week.

Despite the oversupply, the Organization of the Petroleum Exporting Countries (OPEC) continued to produce record levels of oil, while US shale oil pumping showed no signs of slowing down.

Furthermore, supply could soar due to international restrictions being lifted on Iran, allowing it to return its product to the global market. Oil minister Bijan Namdar Zanganeh claims the country could produce as much as 500,000 barrels per day within a week of the restrictions being lifted, with this rising to one million within a month of the date.

The deal between Iran and world powers has weighed heavily on oil prices, sparking concern about oversupply and reduced demand, causing prices to slide downwards.

Ben Le Brun, a markets analyst at OptionsXpress in Sydney, told Reuters: "The market is still digesting news of Iran coming back with more supply. There is uncertainty in terms of demand growth being able to pick up the slack caused by a supply glut."

The greenback strengthened against the euro and yen, uplifted by comments made by Federal Reserve Bank of Atlanta president Dennis Lockhart, as he hinted that the central bank is indeed preparing to raise interest rates in September.

Mr Lockhart - voting member on the Fed’s monetary-policy committee - told the Wall Street Journal that unless there was significant deterioration in the US economy over the next month, he would be recommending a hike.

However, a thriving greenback could limit gains made on oil prices, as it discourages holders of other currencies, such as the euro, pound and yen, to purchase the commodity, as it is heavily influenced by the dollar.