Oil prices slip on dollar rally, ample supply

May 19
8:16 AM 2015

Brent crude oil fell below $66 a barrel on Tuesday as the dollar strengthened and on evidence of ample supplies of Middle Eastern oil despite wars in northern Iraq, Syria and Yemen.

The dollar rose to almost a one-week high against a basket of currencies, recovering from a four-month low and making oil and other commodities more expensive to consumers in non-dollar economies. [FRX/]

Crude rallied on Monday on worries that Middle Eastern oil supplies could be disrupted by escalating fighting in the region, but data suggested production from the Gulf was increasing.

"The oil market is generally oversupplied with high Saudi exports and OPEC is unlikely to cut production," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

"The dollar is also weighing on the market," he added.

Brent for July LCOc1 fell $1.04 to a low of $65.23 a barrel before recovering to around $65.90 by 1110 GMT. U.S. light crude oil CLc1 was down 40 cents at $59.03 a barrel.

Saudi Arabia's crude exports hit their highest in almost a decade in March, official data showed on Monday, as the top oil exporter increased output to record levels.

The OPEC heavyweight shipped 7.898 million barrels per day (bpd) of crude in March, up from 7.350 million bpd in February, Joint Organisations Data Initiative (JODI) data showed.

Saudi Oil Minister Ali al-Naimi has said the kingdom pumped 10.3 million bpd of crude in March - above its previous record production of 10.2 million bpd in August 2013.

The JODI data calmed worries over the risk to supplies from escalating fighting in Iraq, where thousands of Shi'ite militiamen have been deployed to battle Islamic State insurgents who seized the Iraqi provincial capital Ramadi.

Saudi-led forces have resumed military operations in Yemen after a five-day ceasefire despite appeals by the United Nations for more time to allow humanitarian supplies into the country of 25 million, one of the poorest in the Middle East.

Investors say U.S. crude prices could be supported by rising demand ahead of the Memorial Day weekend, May 23-25.

More U.S. drivers will hit the roads this year than in the past decade, encouraged by lower fuel prices, the largest U.S. motorists' advocacy group has said.

The AAA expected 37.2 million people would journey 50 miles (80 km) or more from home during the May 21-25 period, up 4.7 percent from 2014 and the most Memorial Day traffic since 2005.

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