Oil Prices Retreat as Dollar Climbs
March 29 2017 - 11:56PM
Dow Jones News
By Jenny W. Hsu
Oil prices eased slightly in Asian trade Thursday amid a rising
dollar after crude witnessed some of its biggest gains in nearly
two months during the U.S. session.
That bounce, which allowed futures to settle at three-week highs
overnight, was stoked by data from the U.S. Energy Information
Administration showing a larger-than-expected decline in gasoline
and distillate supplies as well as refiners processing oil at a
higher rate.
"The big falls in gasoline inventories, coming near the end of
the refinery-maintenance season, suggest crude-oil inventories are
on the cusp of declining," said ANZ Research. Crude-oil stockpiles
rose a less-than-expected 900,000 barrels last week by the
government's count.
Prices were also propelled by declining U.S. oil imports and
rising exports. "The trending combination of higher crude runs and
lower net crude imports should result in U.S. crude stocks
flattening and then starting to decline by the end of April," said
Societe Generale.
Futures initially built on those gains in Asia, but reversed
that move as the dollar climbed Thursday morning on expectation
that U.S. central bank may increase the frequency of interest rate
increases this year. A stronger dollar often deters crude buying
for traders holding foreign currencies.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in May recently traded down 4 cents at $49.47 a barrel
in the Globex electronic session. May Brent crude on London's ICE
Futures exchange fell 11 cents to $52.31. The WSJ Dollar Index
which compares the greenback to 16 currencies was recently up 0.2%
to 92.91.
However, the ongoing strong uptrend in U.S. crude production is
keeping investors from placing bullish bets. Data showed that
despite the recent pullback in prices, domestic output rose for a
fifth-straight week.
JBC Energy said that given prices have been bobbing in a narrow
range, the growth in U.S. oil-drilling activity seen so far this
year may lose steam over the next few months. But that doesn't mean
less production because new rigs are much-more efficient as they
can drill more oil in less time.
"Rising U.S. oil output remains the key downside risk to oil
prices over the next year," said Vivek Dhar, a commodities
strategist at Commonwealth Bank of Australia.
This, of course, as the market continues to await whether recent
production cuts led by the Organization of the Petroleum Exporting
Countries will be extended beyond the initial six-month term when
the cartel meets to review at the end of May, and to what degree
they are cutting into bloated global supplies.
"With plenty of supportive OPEC chatter on rolling over the
oil-production restrictions and a production accord between Russia
and Iran, the consensus view that the physical market should
tighten in the latter half of the year is building," said Stuart
Ive, a client manager at the Wellington-based OM Financial.
Nymex reformulated gasoline blendstock for April--the benchmark
gasoline contract--eased 0.38 cent to $1.6682 a gallon, April
diesel dropped 0.33 cent to $1.5392 and ICE gas oil for April rose
$1 from Wednesday's settlement to $464.75 a metric ton.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
March 29, 2017 23:41 ET (03:41 GMT)
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