Oil prices slide 2nd straight day as glut worries return

Oil prices fall as dollar rebounds

 

Oil prices

Oil prices fell in trading on renewed glut worries, a rebounding dollar and weaker global equities. Encana photo.

By Barani Krishnan

NEW YORK, May 3 (Reuters) – Oil prices fell for a second day on Tuesday, retreating further from the year’s highs hit last week, as rising output renewed worries about the global glut of crude, the U.S. dollar rebounded and equity markets weakened.

Output from the biggest oil producers in the Middle East jumped last month or could surge in the near term, data showed this week, ahead of a U.S. government report on Wednesday likely to cite record high crude stockpiles.

“There are enough supply stories out there to slow or temper any gains,” Energy Aspects analyst Richard Mallinson said, adding that the only upside came from the possibility of longer-term U.S. production declines.

Brent crude futures settled down 86 cents, or 1.9 percent, at $44.97 a barrel.

U.S. crude’s West Texas Intermediate (WTI) futures fell $1.13, or 2.5 percent, at $43.65.

Iraq said its oil shipments from southern fields averaged 3.4 million barrels per day (bpd) in April, up from 3.3 million bpd in March.

Production from top exporter Saudi Arabia was 10.15 million bpd in April, but sources said that it could soon return to a near-record level of 10.5 million bpd.

Iran is also raising output after its emergence from Western sanctions in January and has nearly doubled exports to almost 2 million bpd since the start of the year.

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.

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In Tuesday’s session, the dollar index rose for the first time since April 22, making dollar-denominated oil less attractive to holders of the euro and other currencies.

Global equities fell, stoked by dismal data on Chinese factory activity, British manufacturing and euro zone growth.

“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.

Analysts polled by Reuters expect the U.S. Energy Information Administration (EIA) to report a 1.4 million barrels build last week to record high stockpiles already at above 540 million barrels.

The American Petroleum Institute (API), an industry group, will issue preliminary inventory data at 4:30 p.m. (2030 GMT) on Tuesday, ahead of the EIA report on Wednesday.

On the technical front, Brent could drop further, said London’s City Index analyst Fawad Razaqzada, who sees support at $44.50, then $42.50 and finally $41 before what could be regarded “the end of the current bullish trend”.

(Additional reporting by Simon Falush in LONDON; Editing by David Gregorio and Chizu Nomiyama)

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