Oil prices fell on Tuesday for a second day as rising US output and a strengthening dollar sapped demand for crude, pushing Brent below $70 a barrel. Brent crude futures, the global benchmark, declined 33 cents, or 0.5 per cent, to $69.13 a barrel at 0331 GMT. The contract for March delivery settled down $1.06, or 1.5 per cent, at $69.46 a barrel on Monday.
US West Texas Intermediate crude futures dropped 47 cents, or 0.7 per cent, to $65.09 a barrel. On Monday, they fell 58 cents, or 0.9 per cent, to $65.56. Prices are still heading for a fifth straight monthly gain. “Markets remain fragile to the downside,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, citing a jump in the number of rigs drilling for oil in the United States.
US production is already on par with Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries (OPEC). Only Russia produces more, averaging 10.98 million barrels per day (bpd) in 2017. US output has jumped more than 17 per cent since mid-2016 and is expected to exceed 10 million bpd soon.
Drillers in the US added 12 oil rigs for new production in the week to Jan. 26, Baker Hughes reported on Friday. The recent rally in oil prices had been fuelled by the US dollar's six straight weekly slides. The greenback is down 3 per cent so far this month. Oil is priced in the US currency, so a falling dollar can boost demand for crude from buyers using other currencies.
The dollar index had been below $90 since Jan. 24, falling below $89 on Friday. But the currency has rebounded since then to around $89.37, which has weighed on crude prices. Investors are bracing “for the upcoming refinery maintenance season amid a strong USD,” ANZ Research said in a note, which also pointed to rising inventories as US shale producers continue their battle with OPEC. Crude prices may also be under pressure on expectations for US inventories to rise for the first time in 11 weeks, according to a preliminary poll by Reuters on Monday.