Oil prices fall 3 percent on stronger dollar, renewed glut worries

NEW YORK (Reuters) - Oil prices slid more than 3 percent on Wednesday as the dollar jumped after the U.S. Federal Reserve’s decision to hike U.S. interest rates and after a jump in crude inventories at the biggest U.S. storage center renewed concerns about a glut.

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. REUTERS/Rick Wilking

Crude tumbled to session lows after the Fed raised interest rates a quarter-point and signaled a faster pace of increases in 2017. The dollar rose, making oil more expensive for countries using other currencies.

Brent crude futures settled at $53.90 per barrel, down $1.82, or 3.27 percent after falling as low as $53.80. U.S. crude ended the session down $1.94, or 3.66 percent at $51.04 per barrel after hitting a low of $50.92.

Earlier, the U.S. Energy Information Administration reported that inventories at the Cushing, Oklahoma, hub rose for the sixth time in seven weeks.

Overall U.S. crude inventories fell 2.6 million barrels in the latest week, the data showed, much more than the decline of 1.6 million barrels analysts had forecast. [EIA/S]

Traders noted that most declines were in PADD 5, the West Coast, saying that did not truly reflect supply-demand fundamentals. Crude stocks in PADD 5 fell about 2.3 million barrels.

“This week really doesn’t point to an effort to clear inventories from PADD3 (Gulf Coast) like many expected,” said Troy Vincent, analyst at New York-based ClipperData.

“The decline in stocks is predominately from the West Coast, while Gulf Coast imports actually ticked higher and stocks only fell 400,000 bpd.”

The Organization of the Petroleum Exporting Countries signaled a growing oil supply surplus next year unless members implement their deal to curb output from record levels and outside producers also deliver on cutback pledges.

In a monthly report, OPEC said that without cuts the 2017 overhang would reach 1.24 million bpd, about 300,000 bpd higher than the forecast in its previous report.

Saudi Energy Minister Khalid al-Falih said it would take time for the market to recover after the deal between OPEC and rival producers to limit supplies.

OPEC and 11 other producing countries agreed to cut almost 1.8 million bpd of production in an effort to end two years of oversupply and cheap oil.

However, Russian energy minister Alexander Novak said on Wednesday that adjustments by oil companies would be “voluntary” to meet Moscow’s commitment to trim output by 300,000 bpd.

“History shows that Russia has a very poor track record in keeping its promises when it comes to cutting output in cooperation with OPEC; Russia has never actually done any cutting in the past,” Michael Wittner, global head of oil research at Societe Generale said in a note.

Additional reporting by Ahmad Ghaddar in London and Henning Gloystein in Singapore; Editing by David Gregorio, Meredith Mazzilli and W Simon