Oil prices dip as strong dollar outweighs supply disruptions
By Henning Gloystein
SINGAPORE (Reuters) – Oil prices dipped on Friday, dragged down by a surging dollar that at least temporarily outweighed supply disruptions in North America, where a massive wildfire was threatening Canada’s huge oil sands operations.
The dollar firmed against the euro and yen on Friday ahead of the April U.S. nonfarm payrolls due later in the day that could support the greenback.
This week’s stronger dollar halted an almost 7 percent fall against a basket of other leading currencies <.DXY> since January. A strong dollar can reduce demand for oil as it makes the dollar-traded commodity more expensive for buyers using other currencies.
International benchmark Brent crude futures <LCOc1> were trading at $44.73 (31 pounds) per barrel at 0400 GMT, 28 cents below their last settlement. U.S. West Texas Intermediate (WTI) crude futures <CLc1> were at $44.04, down 28 cents.
“Investors continued to liquidate (commodity) positions as the U.S.-dollar strengthened,” ANZ bank said on Friday.
The strong dollar at least temporarily outweighed the effects of deep output cuts in North America.
An out-of-control fire around the Canadian oil city of Fort McMurray has forced the evacuation of its residents and the closure of 690,000 barrels per day (bpd) of production from Canada’s total oil sands output of 2.2 million bpd.
Adding to the supply outage in Canada is an ongoing decline in U.S. output.
Data by the U.S. Energy Information Administration (EIA) shows that U.S. crude oil output has fallen by 410,000 bpd this year, and by 800,000 bpd since mid-2015, as producers succumb to a rout that saw prices tumble more than 70 percent between mid-2014 and early-2016.
“While the wildfire in the oil-sands regions of Canada is still wreaking havoc with many producers, U.S. oil output continues to feel the impact of low prices,” ANZ said.
Analysts said the hits to North American output, combined with disruptions in Latin America, were contributing to a fast erosion of global oversupply that peaked as high as 2 million bpd last year.
“Unplanned oil supply disruptions have been a key element so far this year that have contributed to a tighter oil market than was otherwise expected,” said analyst Guy Baber of Simmons & Co.
(Reporting by Henning Gloystein; Editing by Ed Davies and Tom Hogue)