Oil prices fall on steadier dollar

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Oil prices dropped Friday as the dollar steadied and in reaction to supply and demand concerns, traders said.

Brent crude for delivery in July dropped 11 cents to stand at $66.59 a barrel in London midday deals.

US benchmark West Texas Intermediate for June delivery fell 25 cents to $59.63 compared with Thursday’s close.

“Crude oil prices continue to remain very sensitive to the US dollar movements,” said Myrto Sokou, senior research analyst at Sucden brokers.

Oil prices rose earlier in the week as a weaker US unit made dollar-denominated crude cheaper for holders of other currencies.

But the dollar steadied Friday after falling to three-month lows against the euro on positive eurozone growth data this week, coupled with poorly-received US numbers.

Despite Friday’s falls, crude futures have fought back a little in recent weeks after prices plummeted more than 60 percent between June and January, as the Organization of the Petroleum Exporting Countries refused to cut production despite a global glut.

The move by the 12-nation cartel, which pumps about 30 percent of global crude, was widely taken as trying to push US shale producers, which have higher costs, out of the market.

“The upcoming OPEC meeting in three weeks could clarify the current situation in the oil market,” said Sokou.

“Following recent reports and market rumours, we do not expect any drastic change in the OPEC production quotas this time as the US drilling rigs have fallen significantly in the recent weeks.

“However, it looks highly possible that OPEC is likely to expand production later this year in order to prevent any further price spikes in the oil market,” she added.

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– Price risks –

While higher prices boost producers’ revenues they can also weigh on demand — and in turn economic growth — harming the cartel in the long run.

Oil supplies from leading OPEC producers Saudi Arabia, Kuwait and the United Arab Emirates are already near their highest levels in three decades, the International Energy Agency (IEA) said in a monthly report on Wednesday.

OPEC on Tuesday slightly raised its world oil demand forecast for 2015, while acknowledging that there remains a supply glut on the market.

In its monthly oil report, the cartel upgraded global oil demand by 60,000 barrels a day for 2015.

But poorly-received economic data from China this week increased concerns about future take-up of oil in the world’s largest consumer of energy.

The IEA said this week that a glut in the global oil market has not evaporated with other countries stepping up output while US shale producers have cut back, owing to the sharp drop in prices since last year.

In its latest monthly report the International Energy Agency said that global oil supply remained flat at 95.7 million barrels per day (mbd) in April.

Analysts said dealers are also keeping an eye on civil strife in Libya and Yemen, with concerns that the fighting may disrupt supplies in the crude-rich Middle East.