Oil prices extend declines on stronger dollar, rising U.S. output
Oil prices fell on Tuesday for a second day as rising U.S. output and a strengthening dollar sapped demand for crude, pushing Brent below $69 a barrel for the first time in six days.
Brent crude futures, the global benchmark, had declined 46 cents, or 0.7 percent, to $69 a barrel by 0750 GMT, after earlier dropping to as low as $68.86. The contract for March delivery settled down $1.06, or 1.5 percent, at $69.46 a barrel on Monday.
U.S. West Texas Intermediate crude futures dropped 66 cents, or 1 percent, to $64.90 a barrel. On Monday, they fell 58 cents, or 0.9 percent, to $65.56.
Prices are still heading for a fifth straight monthly gain.
“Markets remain fragile to the downside,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, citing a jump in the number of rigs drilling for oil in the United States.
U.S. production is already on par with Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries (OPEC). Only Russia produces more, averaging 10.98 million barrels per day (bpd) in 2017.
U.S. output has jumped more than 17 percent since mid-2016 and is expected to exceed 10 million bpd soon.
Drillers in the U.S. added 12 oil rigs for new production in the week to Jan. 26, Baker Hughes reported on Friday.
The rising tide of U.S. oil output comes after prices rose following an agreement by OPEC producers, along with Russia and other countries, on output curbs.
They agreed in November to extend the output cuts, of 1.8 million bpd, until the end of this year.
Recently, the rally in oil prices had been fueled by the U.S. dollar’s six straight weekly slides. The greenback is down 3 percent so far this month.
Oil is priced in dollars, so a falling greenback can boost demand for crude from buyers using other currencies.
The dollar index has been below 90 since Jan. 24, falling below 89 on Friday. But the currency has rebounded since then to around 89.56, which has weighed on crude prices.
Investors are bracing “for the upcoming refinery maintenance season amid a strong USD,” ANZ Research said in a note.
Crude prices may also be under pressure on expectations for U.S. inventories to rise for the first time in 11 weeks, according to a preliminary poll by Reuters on Monday.