Oil prices fell to two-week lows on Thursday on a rising US dollar and after data released by US Energy Information Administration showed US crude stockpiles grew last week. Anadarko photo.
Oil prices down over 1 per cent Thursday
Oil prices dropped over 1 per cent and hit two-week lows on Thursday due to a rising US dollar and concerns that US crude production might undermine OPEC’s efforts to reduce the global glut of crude.
By 2:17 p.m. EST, Brent crude was down $.93 to $63.80/barrel. That is a decline of 1.44 per cent and the benchmark hit a session low of $63.19. US WTI fell by 1.09 per cent, or 67 cents, to sit at $60.97/barrel, up from a low during the day of $60.18. The Canadian Crude Index was down to $37.71.
Both Brent and WTI hit their lowest rates in two weeks during Thursday’s session.
According to Reuters, rebounding stock prices helped oil futures rebound from the day’s lows. Stocks turned higher following remarks to Congress by Federal Reserve chair Jerome Powell which eased fears about faster interest rate hikes.
On Wednesday, data from the US Energy Information Administration showed a larger-than-expected rise in US crude stocks as well as an increase in gasoline stocks. The EIA also reported US crude production slipped in December, but in November, it hit an all-time high of 10.057 million barrels per day (b/d).
“Yesterday’s report…has reawakened concerns that U.S. production levels will offset OPEC production cuts,” Gene McGillian, manager of market research at Tradition Energy, told Reuters.
On Monday, OPEC officials, including Secretary General Mohammad Barkindo, will meet with US shale industry officials at CERAWeek in Houston to discuss the influence of American production on global prices.
“The standoff ‘shale versus sheikh’ continues to frame the oil market, with the former again gaining the upper hand,” Norbert Ruecker, head of macro and commodity research at Julius Baer told Reuters. He added “We see more downside for oil.”
In January 2017, OPEC and some non-cartel oil producing countries, including Russia, implemented voluntary production cuts to help reduce the global oil oversupply which saw oil prices drop to below $30/barrel in January 2016.
Compliance with the OPEC supply cut agreement has been strong, with OPEC production hitting a 10-month low in February. A drop in Venezuelan production has also help reduce OPEC’s output.
A stronger greenback makes commodities priced in US dollars more expensive for buyers using other currencies.