Oil prices tumble on dollar strength, jump in U.S. inventories
London (May 19) Crude oil prices slipped on Thursday on a stronger dollar and an unexpected increase in U.S. crude inventories.
The fall comes after a rally in recent sessions fueled by production outages in Africa and Canada and production declines across the globe that have propelled expectations of shrinking the global oversupply.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June CLM6, -1.95% traded at $47.11 a barrel, down $1.08, or 2.2%, in the Globex electronic session. July Brent LCON6, -2.27% crude on London’s ICE Futures exchange fell $1.28, or 2.6%, to $47.64 a barrel.
Oil prices began their descent late on Wednesday after minutes of the Federal Reserve’s April meeting indicated that the central bank central bank could raise U.S. interest rates as early as next month. Higher rates tend to push up the value of the dollar, because it becomes more attractive to yield-seeking investors.
Read: Dollar maintains gains after hawkish Fed minutes
“When the Fed statement opened the door to a June interest rate hike, the dollar increased and oil prices dropped,” said Michael Poulsen, oil analyst at Global Risk Management. “Fed members’ voices continue to be mixed, however, so whether the hike comes up next month remains uncertain in our view.”
On Thursday, The Wall Street Journal Dollar Index BUXX, +0.08% , which tracks the buck against 16 other currencies, was up 0.1%.
In the U.S., crude-oil inventories unexpectedly rose by 1.3 million barrels to 541.3 million barrels last week, the Energy Information Administration said Wednesday. Oil inventories in the U.S. have been hovering near all-time highs, underscoring the continuing global glut of crude.
Still, demand for refined products including gasoline and distillates such as diesel fuel rose to more than 20 million barrels a day, the EIA estimated, the highest weekly level since January.
In recent weeks, ongoing wildfires in Canada and supply disruptions in Nigeria and Libya have fueled the rally in oil.
“Disruptions continue to offer support to the market,” said Hamza Khan, head of commodity strategy at ING Bank. He estimates that supply outages have taken at least 1 million barrels of oil offline each day.
However, analysts say these outages are largely temporarily and most of these barrels will come back online soon. Iran, meanwhile, is continuing to ramp up exports after international sanctions against the country were lifted in January.
“The fact that oil hasn’t pushed through $50 a barrel suggests the market is discounting the impact of the disruptions,” said Daniel Hynes, senior commodity strategist with ANZ.
Nymex reformulated gasoline blendstock for June RBM6, -1.92% — the benchmark gasoline contract — fell 2.1% to $1.62 a gallon. ICE gasoil changed hands at $429.50 a metric ton, down $14.25 from the previous settlement.
Source: MarketWatch
