NEW YORK (Bloomberg) -- Oil is on course for its third weekly gain this month as the cratering value of the U.S. currency elevated demand for dollar-denominated commodities when spare crude supplies already were shrinking.

Futures climbed as much as 1.2% on Friday in New York, pushing the weekly advance to 4.4%. The dollar was poised for its longest stretch of weekly declines since 2010. Crude stowed in U.S. tanks and terminals has never been in more demand, as evidenced by the record, 10-week drawdown on American inventories.

Oil traders are reacting to “U.S. dollar movements,” Eric Nuttall, a portfolio manager with Ninepoint Partners LP in Toronto, said in a phone interview. “I’m encouraged that oil is better reflecting underlying fundamentals and an under-supplied market relative to last year, where it seemed to ignore those improving fundamentals for much of the year.”

Oil traded in New York is on track for its strongest January performance in 12 years as the Organization of Petroleum Exporting Countries, Russia and other major producers pressed on with supply caps amid robust demand.

JPMorgan Chase & Co. expects London-traded crude futures to approach the $78 level by the beginning of the second quarter. Meanwhile, hedge funds raised their net-bullish Brent bets to a record, according to weekly ICE Futures Europe data.

“We continue to get direction from the dollar,” Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone. “The long-term effect of production cuts and increased demand are still the main drivers of the rebalance of the market and higher prices.”

West Texas Intermediate for March delivery added 63 cents to $66.14/bbl at 1:17 p.m. on the New York Mercantile Exchange. Total volume traded was about 17% above the 100-day average.

Brent for March settlement added 23 cents to $70.65 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $4.51 to WTI.

The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, has declined about 1.7% this week.

“A lot of people looking at the oil market focus 90% of their time on supply,” Pavel Molchanov, an energy research analyst at Raymond James in Houston, said by telephone. “Demand tends to be overlooked sometimes and it’s actually worth emphasizing how strong oil demand has been.”

Oil-market news. The U.S. oil rig count rose by 12 to 759, the largest addition since March, data from Baker Hughes showed on Friday. The crude market will remain backwardated throughout this year with prices trading between $60 and $75/bbl, Mercuria Energy CEO Marco Dunand said during an interview in Davos. Total SA “is making a big”’ oil discovery in the Gulf of Mexico, CEO Patrick Pouyanne said at dinner with U.S. President Donald Trump in Davos on Thursday.