NEW YORK (Reuters) - Oil prices tumbled 3 percent on Thursday as a resurgent dollar erased gains from the past two sessions, setting the market up for its first weekly loss in five.
Traders and investors also returned their focus to the oversupply in crude and gasoline after Wednesday’s euphoria over the first U.S. crude drawdown in months.
The dollar, on a downtrend since the start of May, jumped on optimism that Friday’s U.S. employment report for April would show strength after upbeat weekly jobless claims. [USD/] A stronger greenback makes dollar-denominated commodities less affordable for holders of the euro and other currencies.
“The dollar is definitely the driver in today’s tumble, though people are also taking stock of the market’s fundamentals and taking some profit after the incredible month of gains we’ve had,” said Phil Flynn, analyst at the Price Futures Group in Chicago.
North Sea Brent crude settled down $2.23, or 3.3 percent, at $65.54 a barrel. For the week, Brent was headed 1.6 percent lower, its weekly loss since April 30.
U.S. crude settled down $1.99, or 3.3 percent, at $58.94 a barrel.
Gasoline fell 2.3 percent, its biggest loss in a month, to settle at just over $1.99 a gallon.
Stronger-than-expected demand growth and a slowdown in U.S. crude supply have boosted oil prices by 50 percent from a six-year low hit in January.
Physical markets, however, are showing a weaker underbelly, crude traders said, pointing to tens of millions of West African, Azeri and North Sea barrels struggling to find buyers.
U.S. crude inventories fell almost 4 million barrels last week, their first weekly decline since January, government data showed on Wednesday. But crude stockpiles still stood at a discouragingly-high 487 million barrels. While weekly demand for gasoline was higher, stocks of the fuel also rose despite the approach of the peak U.S. driving season. [EIA/S]
“There is some disappointment out there that the fundamentals for gasoline and oil products aren’t improving as quickly as some people would like, to provide support for the broader rally in crude that we’ve been seeing,” said Carl Larry, director of business Development for oil and gas at Frost & Sullivan.
The world’s biggest crude exporters, grouping in Vienna next month for a meeting of the Organization of the Petroleum Exporting Countries, are unlikely to cut output, a delegate said.
Additional reporting by Himanshu Ojha and Christopher Johnson in London, and Jacob Gronholt-Pedersen and Henning Gloystein in Singapore; Editing by Andrew Hay, Alan Crosby and Marguerita Choy