Oil prices up as dollar falls as Powell's hawkish comments

MELBOURNE Oil prices went up early on Wednesday, extending gains from the previous two days, as the dollar fell after Federal Reserve Chair Jerome Powell sounded less hawkish on interest rates than markets had expected and as U.S. crude stocks fell.

The price of crude futures went up by 11 cents or 0.1 per cent to $83.80 a barrel at 0119 GMT, adding to a 3.3 per cent gain in the previous session.

U.S. West Texas Intermediate WTI crude futures advanced by 13 cents, or 0.2 per cent, to $77.27 a barrel after jumping 4.1 per cent in the previous session.

The dollar index was down slightly at 103.29 in early trade, extending losses after Powell made comments on Tuesday, making oil cheaper for those holding other currencies.

With less aggressive interest rate hikes in the U.S., the market is hoping that the world's biggest economy and oil consumer can escape a slowdown in economic activity or even a recession and avoid a slump in oil demand.

"I think we're in a fairly balanced market," said Justin Smirk, senior economist at Westpac.

Oil prices will be firmer and OPEC will have to step up output if we have stronger than expected growth out of the developing world. He said that we don't see a big surge in demand.

The American Petroleum Institute industry group showed that crude stocks fell by 2.2 million barrels in the week ending February 3, according to market sources.

Nine analysts polled by Reuters said that crude stocks grew by 2.5 million barrels.

The gasoline and distillate inventories went up more than expected, with gasoline stocks up by about 5.3 million barrels and distillate stocks, which include diesel and heating oil, up by about 1.1 million barrels.

The market will be looking at if data from the U.S. Energy Information Administration, due at 1530 GMT, confirms the decline in crude stocks.