By Timothy Puko And Georgi Kantchev
Oil prices retreated Friday as the dollar pared losses and crude
traders refocused on signs of oversupply.
Light, sweet crude for June delivery traded down $1.21, or 2.1%,
at $56.53 a barrel on the New York Mercantile Exchange. Brent, the
global benchmark, traded down 1 cent, or 0.02%, at $64.84 a barrel
on ICE Futures Europe. Brent had touched its highest intraday point
of the year earlier before the oil markets started to pull back
around 9 a.m. ET.
John Kilduff, founding partner of Again Capital in New York,
said there was news that Russia is unexpectedly increasing
production. Norway is also pushing to approve a $15 billion project
in the North Sea that can profit at $32 a barrel. Signs from
earlier this month that Saudi Arabia is also ramping up production
are important, too, said Andy Lipow, president of Lipow Oil
Associates in Houston.
"The market is in a delicate balance right now," Mr. Kilduff
said. "These marginal increases can tip over the balance."
The dollar--which highly influences oil--also pared losses as
investors position themselves ahead of a number of U.S. economic
data coming next week. Dollar-priced commodities like oil become
more attractive for holders of other currencies as the greenback
depreciates, and less attractive as it gains value. Part of oil's
rally in the last month, including earlier on Friday, came as the
dollar weakened.
"Many explanations can be found for the latest oil price
increase: the weak U.S. dollar, the problems faced by investors due
to low interest rates, ongoing fighting in Yemen and the (slight)
decline in U.S. oil production," analysts at Commerzbank said in a
note. "On closer inspection, however, these factors ultimately
reveal themselves to be 'soft' reasons."
Investors had been discarding the risk of Iran and Libya
returning to the oil market, the bank said. If both countries were
to regain their respective precrisis production quotas, the bank
said, an increase in production of up to 2 million barrels a day
would almost entirely offset the global demand growth over the next
two years and increase the oversupply.
Oil-field-services firm Baker Hughes will release its weekly
U.S. oil rig count, a proxy for activity in the industry. The
number of oil drilling rigs has declined for 19 straight weeks and
stood at 734 last week, half the number just six months ago.
That did have some analysts upgrading their forecasts for oil
prices.
Société Générale raised its Brent crude forecast for the year by
$4.33 to $59.54 a barrel. It also raised its Nymex crude forecast
for the year by $4.28 to $53.62 a barrel.
"We also have evidence that the global rebalancing process,
taking place on the back of U.S. shale oil, is finally getting
under way," SocGen's head of commodities research Michael Wittner
said in a report.
However, it said oil prices in May and June will still be under
pressure due to U.S. oil stockpiles rising by 1.9 million barrels a
day in the second quarter.
Nymex reformulated gasoline blendstock for May--the benchmark
gasoline contract--recently fell 0.7 cent, or 0.4%, to $1.9886 a
gallon. The national average price at the pump tops $2.50 a gallon
today for the first time since December, according to AAA. Gasoline
futures have climbed nearly 40% this year on growing demand and
expectations for strong consumption during the busy summer-driving
season.
May diesel recently fell 0.36 cent, or 0.2%, to $1.9203 a
gallon.
Nicole Friedman, James Ramage, Kjetil Malkenes Hovland and Eric
Yep contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
Write to Timothy Puko at timothy.puko@wsj.com
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