Oil has slumped more than one per cent, touching two-week lows under pressure from a retreating stock market and worries about surging US crude output.
Brent, the global benchmark, settled at $US63.83 a barrel, down 90 cents, or 1.4 per cent. US crude settled down 65 cents, or 1.1 per cent, at $US60.99 a barrel, after touching a low of $US60.18. The session lows for both benchmarks were the lowest in two weeks.
‘Ever since we had that extreme sell-off by equity markets a couple of weeks ago, oil prices seem to have one eye on the activity of the equity markets and have been under a strong influence of the dollar,’ said Matt Smith, director of commodity research at ClipperData.
US stock markets fell more than 1 per cent after President Donald Trump announced import tariffs on steel and aluminium.
The US dollar hit a six-week high early but retreated in the afternoon, which tempered losses in crude futures. A weaker dollar can boost oil and other greenback-denominated currencies.
‘One of the things that contributed to the strength of the (oil) market was the weakness of the dollar over the past couple months,’ said Gene McGillian, manager of market research at Tradition Energy in Stamford.
On Wednesday, weekly data from the US Energy Information Administration showed a larger-than-expected increase in US crude inventories and a rise in gasoline stocks.
US crude output slipped in the last month of 2017, but in November hit an all-time high of 10.057 million barrels per day (bpd). Weekly data showed another record and further gains are expected.
‘Yesterday’s report … has re-awakened concerns that US production levels will offset OPEC production cuts,’ said McGillian.
OPEC officials will meet US shale executives at a US energy conference on Monday, underlining the influence of American output 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.’
OPEC’s cut, which began a year ago, has helped boost prices from levels below $US30 seen in January 2016.
A Reuters survey on Wednesday found OPEC production fell in February to a 10-month low.