Oil slips due to stronger dollar and rising US crude production
A key Opec and non-Opec meeting looms, at which members, and Russia, may agree to raise output; US crude production hits a record high of 10.9-million bpd
New York — Oil prices slipped on Thursday, pressured by a strengthening dollar, rising US crude production, and expectations that oil cartel Opec could decide to increase output at their meeting next week.
Brent crude oil lost 82c to trade at $75.92 a barrel by 3.32pm GMT, while West Texas Intermediate (WTI) crude slipped 24c to $66.40.
Brent and WTI hit three-and-a-half-year highs in May but have since drifted lower, indicating investors expect the market to soon become better supplied as US crude production rises and as Opec and its allies look poised to increase output.
The dollar gained against a basket of currencies, making moves towards the six-month highs it hit in late May as the euro fell broadly as the European Central Bank (ECB) planned to keep interest rates at record lows into the summer of 2019.
"[ECB president Mario] Draghi came out a little bit more dovish than people thought he was going to be. And that really caused the euro to take a dip and the dollar to go up, which is putting downward pressure on prices," said Phil Flynn, analyst at Price Futures Group in Chicago.
A stronger dollar makes greenback-denominated commodities, such as oil, more expensive for holders of other currencies.
Oil supply concerns have also been weighing on the market. US crude output has risen almost 30% in the past two years to a record high of 10.9-million barrels per day (bpd). Russia pumped 11.1-million bpd in the first two weeks of June, above Saudi Arabia, which produced slightly more than 10-million bpd.
In 2017, Opec began supply cuts of 1.8-million bpd to support the market. But, with Brent prices up by about 180% from their 2016 low, global crude inventories falling, Venezuelan production plummeting, and imminent sanctions against Iran, the group may soon end their supply cuts.
The alliance meets on June 22-23 in Vienna, where it is expected to come to a decision on output.
"A wait-and-see approach is taking hold across the energy complex as market participants buckle down ahead of next week’s crunch Opec/non-Opec meeting," said Stephen Brennock, analyst at London brokerage PVM Oil Associates.
Russian energy minister Alexander Novak told reporters that members of the Opec-plus production cut deal can consider returning up to 1.5-million bpd to the market gradually. Saudi energy minister Khalid al-Falih said he expected a reasonable and moderate agreement next week when Opec and non-Opec oil producers meet. Barclays said in a note that it expected the group to increase production by 700,000 to 800,000 bpd.