New York: Oil dropped as the dollar climbed and as the revival of US shale drilling boosted the country’s production outlook.
Futures fell 1.5 per cent in New York. The dollar rose 0.3 per cent against leading currencies, making commodities priced in the greenback less appealing to investors. US oil drillers boosted the rig count by 17 to 583 last week, the most since October 2015, according to Baker Hughes Inc. A government report on Wednesday is projected to show that US crude stockpiles climbed for a fifth week, according to a Bloomberg survey.
Crude prices have fluctuated above $50 since the Organisation of Petroleum Exporting Countries (Opec) and 11 other nations agreed to start curbing output by 1.8 million barrels a day. While Opec members have implemented most of their cuts and Russia says its own reductions are ahead of schedule, US production has edged higher as drillers add rigs. Rising tensions with Iran aren’t yet seen threatening a nuclear deal that lifted sanctions on the country’s oil exports.
“Prices are under pressure because of high inventories,” Sarah Emerson, managing director of ESAI Energy in Wakefield, Massachusetts, said by telephone. “This should be the case for the next couple of weeks, until inventories start to decline.”
West Texas Intermediate for March delivery slipped 82 cents to close at $53.01 (Dh195.04) a barrel on the New York Mercantile Exchange. It was the biggest decline since January 18. Total volume traded was about 31 per cent below the 100-day average.
Brent for April settlement fell $1.09, or 1.9 per cent, to $55.72 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.09 premium to April WTI.
Ample inventories
US crude supplies probably expanded by 2.5 million barrels last week, according to the median estimate in a Bloomberg survey before an Energy Information Administration report on Wednesday. Analysts projected the report will show that US fuel stockpiles rose while refineries cut operating rates.
Prices climbed last week as US President Donald Trump’s administration imposed new sanctions on Iran and warned the Islamic republic that it was “playing with fire” by testing missiles.
Iran carried out further tests during an annual military exercise on Saturday, a day after Trump imposed fresh sanctions on a raft of individuals and companies in response to the country test-firing a ballistic rocket. While the missile tests didn’t contravene the nuclear accord signed in 2015, they are seen by some as going against a United Nations Security Council resolution that enshrines the agreement.
“Given the valuation of the dollar and the high inventory level its hard to justify these prices,” Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis, which oversees $6.1 billion, said by telephone. “We’ve built a lot of good news into the oil price, which makes it vulnerable.
