Brent falls towards $55 as rally fades on inventory build2 min read . Updated: 19 Mar 2015, 05:08 PM IST
US crude stocks at Cushing, Oklahoma at record high; dollar extends fall as market sees slower US rate lift-off
Singapore: Brent crude futures fell towards $55 a barrel on Thursday following a bigger than expected crude stock build in the US that fuelled concerns of an oversupply in the world’s largest oil consumer.
US oil prices partly reversed Wednesday’s steep gains on a tumbling dollar after the Federal Reserve signalled a slower pace of interest rate hikes.
Brent crude for May delivery fell 52 cents to $55.39 a barrel by 12:45pm, after jumping as much as 6% in the previous session.
US crude for April delivery fell by $1.08 to $43.58 a barrel, after hitting a low of $43.40.
“The harsh reality of last night’s build in inventory is starting to set in on oil prices," said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
US crude stocks rose by 9.6 million barrels last week, nearly three times analysts’ expectations, data from the Energy Information Administration (EIA) showed on Wednesday.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.865 million barrels to 54.4 million barrels, a record since the EIA began tracking inventories at the delivery point for the US light sweet crude futures contract traded on the New York Mercantile Exchange.
“The weaker US dollar was supportive of commodity prices but another big build in inventory might mean the upside on oil prices is limited until there is some turnaround in US oil production," said Spooner.
Oil prices had soared on Wednesday as the US dollar fell after the Federal Reserve indicated it preferred a more gradual path to normalizing US interest rates despite being open to the first rate hike in almost a decade.
A weaker dollar usually supports oil prices because it makes commodities denominated in the dollar cheaper for holders of other currencies.
A pushback in the timing of US interest rate hikes would give oil producers more breathing space for financing, Daniel Ang, an analyst at Phillip Futures, said in a note.
“What this means is that although yesterday’s weakening of the US dollar gave some upward push to oil prices, this effect will eventually dissipate," Ang wrote.
“Oil producers (will be) able to expand their businesses or even tide across this period of low prices with cheaper financing."
China, the world’s second-largest oil consumer, could trim oil purchases as its petroleum reserves reach capacity and oil refiners cut production, a move that could exacerbate the global glut of oil. Reuters