×

US oil drops for 3rd straight day as glut worries return

U.S. oil prices fell more than 2 percent Tuesday, retreating swiftly from the year's highs hit last week, on renewed glut worries, a rebounding dollar and weaker global equities.

Iraq said its oil shipments from southern fields averaged 3.364 million barrels per day (bpd) in April, up from 3.286 million in March.

Production from top exporter Saudi Arabia was 10.15 million bpd in April, but sources said it may return to near-records of 10.5 million bpd soon.

Iran is also raising output following an end to sanctions in January, having increased its exports to almost 2 million bpd from a little over 1 million bpd at the start of the year.

Daily supply of North Sea Brent crude oil, which contributes to the futures benchmark, will rise in June to its highest in four months, up 17 percent from May, according to monthly loading programs provided by trading sources.

"There are enough supply stories out there to slow or temper any gains," Energy Aspects analyst Richard Mallinson said, though he added that lower supply from the United States should support prices in the longer term.

Brent crude futures were down 79 cents, or 1.7 percent, at $45.02.

U.S. crude futures were settled 2.5 percent lower, or $1.13, at $43.65 a barrel, falling for a third-straight day.

Brent and WTI both lost about 3 percent each in Monday's trade as production from the Organization of the Petroleum Exporting Countries neared all-time peaks and record speculative buying in global benchmark Brent sparked profit-taking on last month's over 21 percent rally to 2016 highs at $48.50.

The dollar index rose for the first time since April 22, making commodities denominated in the greenback, including crude oil, less attractive to holders of the euro and other currencies.

Global stock markets fell, stoked by a 14th straight month of decline in Chinese factory activity in April. British manufacturing output dropped to a three-year low and euro zone growth was forecast to be slower than previously expected this year.

"The latest weakness in oil is also likely the result of higher U.S. crude build expectations and the technical stall identified for prices," said David Thompson of Washington-based commodities-specialized broker Powerhouse.

U.S. crude inventories were expected to have risen 1.4 million barrels last week, adding to record highs, a Reuters poll of analysts concluded.

On the technical front, Brent prices could drop further before resuming April's upward trend, said Fawad Razaqzada, analyst at London's City Index. He sees support at $44.50, $42.50 and finally $41 before what could be regarded "the end of the current bullish trend."