LONDON: Oil prices fell for a third day on Thursday, dropping towards $64 a barrel as rising US inventories, record output and a stronger dollar outweighed high OPEC compliance with its supply-cutting deal.
A US government report on Wednesday showed a larger-than-expected increase in US crude inventories and a rise in gasoline stocks. US crude output reached a record in November, although it slipped in the last month of 2017.
Brent crude, the global benchmark, was down 64 cents at $64.09 a barrel at 1215 GMT. US crude fell 45 cents to $61.19.
US crude output hit an all-time high of 10.057 million barrels per day (bpd) in November before falling slightly in December, the government said, but weekly data showed another record and further gains are expected.
“Weekly figures suggest the upward trend will resume in January and February and the old records are likely to be smashed,” said Tamas Varga of oil broker PVM.
The rise in US output in recent weeks has been overshadowing supply curbs by other producers, led by the Organization of the Petroleum Exporting Countries and Russia.
OPEC officials will meet US shale executives at a US energy conference on Monday, a gathering that underlines the influence of American output in keeping a lid on global prices.
“The standoff ‘shale versus sheikh’ continues to frame the oil market, with the former again gaining the upper hand,” said Norbert Ruecker, head of macro and commodity research at Julius Baer. “We see more downside for oil.”
Oil also fell due to a stronger dollar, which makes commodities denominated in the US currency more expensive for holders of other currencies. The dollar index hit a six-week high on Thursday.
OPEC’s cut, which began a year ago, has nonetheless helped to boost prices from levels below $30 seen in January 2016. Producers are sticking to the deal and an involuntary drop in Venezuelan output has further boosted compliance.
A Reuters survey on Wednesday found OPEC production fell in February to a 10-month low.
For now though, the gains in US supply are prevailing in shaping sentiment in the oil market, other analysts said.
“Despite the expanding output curbs by OPEC and non-OPEC members such as Russia, the market has been focusing more on rising US output since around late January,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.
Source: Brecorder.com
