Oil Declines amid Stronger Dollar, Crude Oversupply in U.S.

Oil prices fell Friday, tumbling as the dollar strengthened and as a supply glut in top consumer, the United States, trumped worries about falling production from Libya.

The market had come under pressure from Wednesday’s Energy Department report, which showed a 7.3 million-barrel rise in crude inventories to their highest December level on record. Analysts had expected a seasonal decline.

The slide was exacerbated as oil prices reacted to a strengthening dollar index.

“There’s still significant weakness in confidence, and that means that we’re going to have occasional retests to the downside,” said Richard Hastings of Global Hunter Securities. The strengthening dollar index triggered the slide on Friday, he said.

Additionally, the market continued to reel from bearish storage data just before the Christmas holiday.

“The numbers on Wednesday were really bearish, and it’s possible the market is still trying to digest them,” said Andrew Lebow, a Senior Vice President of Jefferies in New York. “Maybe the path of least resistance is down here, given that we’ve been in a long down trend.”

Crude imports by Japan, the world’s fourth-biggest oil buyer, dropped 17.3 percent in November from a year earlier to 14.68 million kilolitres (3.08 million bpd), government data showed on Thursday.

Brent crude settled down 79 cents at $59.45, while U.S. crude fell $1.11 to $54.73 in thin trade as many countries were still on holiday.

“We tried to rally off of the Libyan situation, but I think that the market is still reeling from larger-than-expected inventory data,” said Phil Flynn of Price Futures Group in Chicago.

Fighting in Libya has cut output there to 352,000 barrels a day, or about half November’s average, state oil company spokesman said on Thursday. This countered the U.S. Department of Energy’s (DOE) report showing a big stockbuild.

In Libya, a rocket hit a storage tank at the country’s biggest export terminal, Es Sider, setting it on fire as armed factions allied to competing governments fought for control, officials from both sides said on Thursday.

On Friday, officials said the blaze had spread to two more tanks.

Source: Reuters