Crude revenue: Flames emerge from a pipeline at the oil fields in Basra, southeast of Baghdad, Iraq, on October 14, 2016. Picture: Reuters
Crude revenue: Flames emerge from a pipeline at the oil fields in Basra, southeast of Baghdad, Iraq, on October 14, 2016. Picture: Reuters

New York — Oil prices slipped on Wednesday, as a strengthening dollar overshadowed a US crude inventory report that showed domestic crude stocks falling more than expected.

Brent crude futures were down 31 US cents at $77.43 a barrel by 3.17pm GMT, while US crude futures fell 30c to $71.01 a barrel.

The dollar firmed to nearly a five-month high against a basket of other major currencies on Wednesday. A stronger greenback makes it more expensive to buy dollar-denominated commodities such as oil.

"The only reason why we’re not seeing higher prices from here today is the strength of the US dollar," said Tariq Zahir, managing member at Tyche Capital Advisors.

US crude stocks fell last week as exports hit a new one-week record, while inventories of both petrol and distillates fell, the Energy Information Administration said.

Crude inventories fell by 1.4-million barrels in the week to May 11, compared with analysts’ expectations for a decrease of 763,000 barrels.

"All in all, the report is bullish. Oil stocks fell across the board and in some cases more than expected, while rising exports point to healthy demand for US crude," Commerzbank analyst Carsten Fritsch said.

Physical crude markets are sagging under the weight of unsold barrels of oil, while the 50% rise in oil prices in the past year is encouraging major companies such as ExxonMobil, Royal Dutch Shell, Chevron, BP and Total to increase output.

Spot crude oil cargo prices are at their steepest discounts to futures prices in years as sellers struggle to find buyers for West African, Russian and Kazakh cargoes, while pipeline bottlenecks trap supply in West Texas and Canada.

On Wednesday, the International Energy Agency warned that global demand was likely to moderate in 2018, as the price of crude neared $80 a barrel and many key importing nations no longer offered consumers generous fuel subsidies.

In its monthly report, the Paris-based IEA cut its forecast for global demand growth in 2018 to 1.4-million barrels per day, from a previous estimate of 1.5-million barrels per day.

"On balance, the report is tending more to the negative side. Demand for oil has been revised downwards for the second half of the year from April," PVM Oil Associates strategist Tamas Varga said.

Reuters

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