Oil Prices Down on Strong Dollar, Concerns About Oversupply
Oil prices fell on Friday on a stronger dollar and continuing concerns about oversupply ahead of the latest U.S. oil drilling data.
Brent crude for July delivery was recently down 0.8% to $64.54 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures for July were trading down 1.1% at $60.10 a barrel.
In recent weeks, oil markets have often moved in response to swings in the U.S. dollar. A stronger dollar makes it more expensive for oil buyers holding other currencies and prompts investors to move money between asset classes. On Friday, The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other currencies, rose 0.4%.
The International Energy Agency said on Thursday that the recent oil market strength stems partly from unexpectedly strong global oil demand growth in the first quarter. The Paris-based energy watchdog upgraded its demand growth forecast by 300,000 barrels a day to 1.4 million barrels a day this year.
But in its closely watched monthly oil report, the IEA also cautioned oil production growth remains “exceptionally high,” as some members of the Organization of the Petroleum Exporting Countries ramp up their output.
The record production levels from Saudi, Iraq and United Arab Emirates highlight OPEC’s policy of defending market share and implies production will remain high, said analysts at UBS bank. “So unless/until non-OPEC supply growth slows, we think the market imbalance is here to stay.”
Investors are looking forward to the release of the latest U.S. oil drilling rig count-a proxy for activity in the industry-later on Friday by Baker Hughes Inc.
There are now about 60% fewer rigs working since a peak of 1,609 in October and the count has fallen for 26 straight weeks. The rate of decline, however, has slowed in recent weeks and some shale oil companies say they could add rigs in the coming months if prices stabilize near the current levels.
Nymex reformulated gasoline blendstock for July—the benchmark gasoline contract—fell 1.4% to $2.1082 a gallon, while ICE gasoil for July changed hands at $587 a metric ton, down $2.25 from Thursday’s settlement.
(Source: The Wall Street Journal)