Oil prices fell on Thursday, headed for a second straight weekly drop on a stronger dollar, signs of an inventory build at the US storage hub in Cushing, Oklahoma, surging US crude production and investor jitters about a potential trade war.
Brent crude futures fell 73 cents, or 1.1 per cent, to settle at $US63.61 per barrel. US West Texas Intermediate (WTI) crude futures fell $US1.03, or 1.7 per cent, to settle at $US60.32 per barrel.
Brent was on track for a drop of around 0.8 per cent this week, after last week’s 4.4 per cent slide. WTI was on track for a 1.5 per cent decline after a 3.6 per cent slide last week.
‘It looks to me that crude has peaked and it’s heading lower,’ said Walter Zimmerman, chief technical analyst at United-ICAP. ‘I see it heading back to test the early February lows, $57 for WTI and $62 for Brent. And I’m not at all confident that those levels are going to hold,’ he said.
The dollar rose about 0.6 per cent against a basket of currencies. A stronger greenback makes it more expensive to buy dollar-denominated commodities like oil.
Also pressuring crude prices, data from market intelligence firm Genscape showed inventories at the Cushing, Oklahoma storage hub rose by more than 290,000 barrels in the week to March 6, said traders who saw the data.
This increase, if confirmed by official data, would be the first build in 12 weeks at Cushing, where stockpiles have more than halved since November.
Data from the Energy Information Administration (EIA) on Wednesday showed US crude production hit a record of almost 10.4 million barrels per day (bpd) in the week ended March 2.
The EIA production data is ‘finally taking some of the wind out of the sails of the bullish speculators,’ said Rob Haworth, senior investment strategist with US Bank Wealth Management.
Worries that Washington might start a trade war also put markets on edge.
‘Until the US tariff issue is better defined, we feel that odds favour a renewed sharp downturn in the stock market that will easily spill into the oil space,’ Jim Ritterbusch, president of energy advisory firm Ritterbusch & Associates said in a note.
US crude output is expected to surge beyond 11 million bpd by late 2018, limiting the effectiveness of output cuts by the Organization of the Petroleum Exporting Countries, Russia and other producers.
Adding to concerns is China’s reported drop in crude imports for February.
Goldman Sachs re-issued its 2018 global oil demand growth forecast of 1.85 million bpd, despite recent signs of a slight slowdown, citing a strong start to the year and a pattern of second-quarter demand accelleration.