Crude oil futures - weekly outlook: March 23 - 27

Investing.com - Crude oil futures rallied on Friday, as a broadly weaker U.S. dollar lifted demand for dollar-denominated commodities.

On the New York Mercantile Exchange, crude oil for delivery in May jumped $1.04, or 2.28%, to settle at $46.57 a barrel by close of trade. The front-month April contract, which expired at the end of Friday's trading session, rose $1.76, or 4%, to settle at $45.72 a barrel.

Based on the most-active contracts, New York-traded oil futures jumped $1.73, or 3.71%, on the week, the first weekly gain in five weeks.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, tumbled 1.4% on Friday to end at 98.05, moving further away from a 12-year high of 100.78 hit on March 13.

The dollar tumbled after the Federal Reserve downgraded its forecasts for growth and inflation earlier in the week and lowered its interest rate projections, prompting investors to push back expectations on the timing and pace of future rate increases.

Dollar-denominated oil futures contracts tend to rise when the dollar falls, as this makes oil cheaper for buyers in other currencies.

U.S. oil received an additional boost after industry research group Baker Hughes (NYSE:BHI) said that the number of rigs drilling for oil in the U.S. fell by 41 last week to 825, the 15th-straight week of declines and the lowest since March 2011.

Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

However, total U.S. crude oil inventories stood at 458.5 million barrels as of last week, the most in at least 80 years, indicating that cheap prices have yet to affect output.

Elsewhere, on the ICE Futures Exchange in London, Brent for May delivery tacked on 89 cents, or 1.64%, on Friday to settle the week at $55.32 a barrel by close of trade.

For the week, London-traded Brent added 66 cents, or 0.56%, snapping a two-week losing streak.

Oil prices have stabilized somewhat in recent weeks, following a seven-month rout which saw prices drop as much as 60% after OPEC resisted calls to cut output, while the U.S. pumped at the fastest pace in more than three decades, creating a glut in global supplies.

The spread between the Brent and the WTI crude contracts stood at $8.75 a barrel by close of trade on Friday, compared to $9.83 in the preceding week.

Meanwhile, the euro rallied above the $1.08-level against the greenback, supported by fresh hopes Greece will secure the additional bailout funds needed to avoid bankruptcy.

German Chancellor Angela Merkel said on Friday that financial aid payments to Greece could begin in tranches if the country's list of reforms was approved by its international lenders.

In the week ahead, investors will be focusing on Tuesday’s U.S. inflation report after Fed Chair Janet Yellen warned last week that the stronger dollar was pushing down consumer prices.

Oil traders will also continue to monitor developments surrounding talks between Iran and world powers over Tehran's nuclear program as well as fighting in Libya.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, March 23

The U.S. is to release a report on existing home sales.

Tuesday, March 24

China is to release the preliminary reading of the HSBC (LONDON:HSBA) manufacturing index.

The euro zone is to produce survey data on private sector activity, while Germany and France will also publish what will be closely watched individual reports.

The U.S. is to release reports on consumer inflation and new home sales, while the American Petroleum Institute, an industry group, is to publish its weekly report on oil supplies.

Wednesday, March 25

In the euro zone, the Ifo Institute is to report on German business climate.

The U.S. is to publish data on durable goods orders as well as a weekly government report on oil inventories.

Thursday, March 26

The U.S. is to release weekly data on initial jobless claims.

Friday, March 27

The U.S. is to round up the week with final data on fourth quarter economic growth and the revised reading of the University of Michigan consumer sentiment index.