Oil prices are falling again, now below $60 per barrel. Image Credit: File photo

Oil steadied near the highest close since 2014 after President Joe Biden pledged to continue trying to lower prices and an industry report pointed to a modest increase in U.S. crude stockpiles.

Futures in New York traded near $87 a barrel after advancing almost 6% over the past three sessions. While Biden does have some options to address the increase in oil prices, many of them would be limited and likely short-lived. Crude's rally poses a challenge for consuming nations and central banks as they try and stave off inflation while supporting economic growth.

The American Petroleum Institute reported U.S. crude inventories rose by 1.4 million barrels last week, according to people familiar. That would be the first gain in eight weeks if confirmed by official data later Thursday.

Oil has rallied around 30% since the end of November as stronger than expected demand and supply outages tightened the market, leading to buyers in Asia paying sharply higher premiums for spot cargoes. Goldman Sachs Group Inc. is forecasting a return to $100 crude in the third quarter, and the International Energy Agency said that demand is on track to hit pre-pandemic levels.

"Oil is a bit overheated," said Suvro Sarkar, an energy analyst at DBS Bank Ltd. in Singapore, adding that there's little President Biden can do on a political level to ease prices.

Biden told reporters on Wednesday that the administration would work on trying to increase supplies that are available, adding that it would be hard. That followed comments on Tuesday that the administration was working with oil-producing countries to ensure supply rises to meet demand.

U.S. gasoline stockpiles increased by 3.46 million barrels last week, according to the API. Nationwide crude inventories are forecast to have dropped by 1.75 million barrels, according to a Bloomberg survey before Energy Information Administration data later Thursday.

Dollar claws back losses

The dollar edged lower on Thursday, but only for a while, as it clawed back $1 in earlier losses. This week's rally in U.S. Treasury yields paused, and currencies such as the Canadian and Australian dollars were boosted by high commodity prices and continued optimism about future global economic growth.

The Aussie firmed 0.3%, extending advances from the previous day, and the Canadian dollar was heading back towards its 10-week high touched on Wednesday with one U.S. dollar worth C$1.245.

Strong Australian jobs data and a high Canadian inflation print were also factors, though the gains in commodity currencies were broad based, with the dollar losing 0.2% on the Norwegian krone.

"Overnight commodity prices were the big driver for commodity currencies, but you've still got the undertone that (COVID-19 variant) Omicron is not going to have a lasting detrimental impact on the global economic outlook," said Kim Mundy, senior economist and currency strategist at Commonwealth Bank of Australia.

Governments worldwide are easing quarantine rules and reviewing coronavirus curbs as they bid to launch their economies back into some version of normality, motivated by the lower severity of the Omicron variant. That has helped commodities rally. [nL8N2TU3HV Brent crude futures touched $89.17 on Wednesday, its highest level since Oct. 2014, supported in by a tight short-term supply outlook, and were steady a little below that on Thursday.

Newcastle coal futures are at their highest point since October, and iron ore also gained.

Elsewhere the euro and sterling continued to edge higher, gradually regaining some ground after having their worst days in a month on Tuesday, when the dollar caught a lift from a jump in U.S. Treasury yields.

The European common currency was last at $1.1351, the pound was at $1.3636, and the yen was a little softer at 114.46 per dollar Overall this left the dollar index, which measures the greenback against six major peers, at 95.555.

U.S. Benchmark 10-year note yields were at 1.8557%, just off their two-year high of 1.902% early on Wednesday.

The gains come as traders prepare for the United States to tighten monetary policy at a faster pace than previously thought. Fed funds futures have fully priced in a rate hike in March and four in all for 2022.

The median forecast of analysts polled by Reuters is for the Fed to raise rates three times this year, starting in March, to 0.75-1.00% by end-2022, but nearly half of the 86 people surveyed said they expected four hikes.

Bond yields are rising elsewhere, too. Germany's 10-year bond yield rose above 0% for the first time since 2019 on Wednesday, providing support to the euro