Oil sinks 1.1%, settling at $60.99, slammed by rising US crude stockpiles, stronger dollar

  • Oil prices fell after data on Wednesday showed a bigger-than-expected rise in U.S. crude inventories and a surprise buildup of gasoline stockpiles.
  • U.S. oil output hit record in November, and is expected to rise further.
  • A Reuters survey indicates that OPEC's output fell in February.
An oil pump jack in Gonzales, Texas.
Getty Images
An oil pump jack in Gonzales, Texas.

Oil fell on Thursday, hitting two-week lows on pressure from a strong dollar and worries that surging U.S. crude output might thwart OPEC's efforts to drain global supply.

U.S. crude finished Thursday's session down 65 cents, or 1.1 percent, at $60.99, after touching an intraday low of $60.18.

Brent crude, the global benchmark, was down 89 cents, or 1.4 percent, at $63.84 a barrel at 2:22 p.m. ET, after sliding as low as $63.19.

The session lows for both benchmarks were the lowest prices in two weeks.

Oil also fell due to a stronger U.S. dollar, which makes commodities denominated in the U.S. currency more expensive for other currency holders. The dollar index hit a near six-week high on Thursday following consumer inflation figures showing the largest gain in 12 months.

Wednesday's weekly data showed a larger-than-expected increase in U.S. crude inventories and a surprise rise in gasoline stocks.

U.S. crude slipped in the last month of 2017, but in November it hit a record 10.057 million barrels per day (bpd), the government said. Weekly data showed another record and further gains are expected.

"Yesterday's report...has reawakened concerns that U.S. production levels will offset OPEC production cuts," said Gene McGillian, manager of market research at Tradition Energy in Stamford.

The rise in U.S. output in recent weeks has been overshadowing supply curbs by other producers, led by the Organization of the Petroleum Exporting Countries and Russia.

OPEC officials will meet U.S. shale executives at a U.S. energy conference on Monday, a gathering that underlines the influence of American output in keeping a lid 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 nonetheless helped to boost prices from levels below $30 seen in January 2016. Producers are sticking to the deal and an involuntary drop in Venezuelan output has further boosted compliance.

A Reuters survey on Wednesday found OPEC production fell in February to a 10-month low.

For now though, the gains in U.S. supply are prevailing in shaping sentiment in the oil market, other analysts said.

"Despite the expanding output curbs by OPEC and non-OPEC members such as Russia, the market has been focusing more on rising U.S. output since around late January," said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.