Oil slipped below $64 a barrel on Thursday as record U.S. production and rising inventories outweighed a weak dollar and Saudi Arabia’s comments that OPEC and other producers were committed to their pact on cutting supplies.
U.S. crude output hit a record 10.27 million barrels per day, the Energy Information Administration said on Wednesday, making it a bigger producer than Saudi Arabia. U.S. crude and gasoline inventories rose last week, U.S. data showed.
Brent crude LCOc1, the global benchmark, fell 78 cents to$63.58 at 1438 GMT, giving up an earlier gain that had extended Wednesday’s rally. U.S. crude CLc1 dropped 51 cents to $60.09.
“What we have now is a bit of a re-adjustment from the price rise we had yesterday, which was a bit overdone,” said Olivier Jakob, analyst at Petromatrix. “I don’t think the data was that supportive,” he added, referring to the EIA’s inventory report.
Crude inventories rose by 1.8 million barrels in the week to Feb. 9, the U.S. Energy Information Administration said, an increase that was less than analysts’ forecasts.
Gasoline stocks rose by 3.6 million barrels, more than double the forecast.
Oil had climbed on Wednesday and early on Thursday after Saudi Energy Minister Khalid al-Falih said OPEC would do better to leave the market tight than end the deal on cutting output too soon.
“Khalid al-Falih gave his strongest hint yet that exiting the current supply agreement is unlikely to be on the agenda this year,” said Tamas Varga of oil broker PVM.
Under the deal, the Organization of the Petroleum Exporting Countries agreed to cut output by 1.8 million barrels per day, almost 2 percent of global supply. The cuts started a year ago and will run until the end of 2018.
But the rebound in U.S. production, encouraged by the higher prices delivered by the OPEC-led cuts, is undermining efforts to curb supplies. The EIA expects U.S. production to top 11 million bpd in late 2018, a year earlier than projected last month.
Rising U.S. output also countered support from a weaker dollar, which fell to a 15-month low against the yen. A weaker dollar makes oil and other dollar-denominated commodities cheaper for holders of other currencies.(Source: Reuters)