[LONDON] Brent crude oil fell towards US$59 a barrel on Monday as the dollar strengthened and a supply glut pushed global oil inventories to record highs.
The dollar hit a more than 11-year high against a basket of currencies after data showed the US unemployment rate in February fell to its lowest level since May 2008, making commodities priced in the greenback more expensive for holders of other currencies.
Oil inventories are rising across the world as production outstrips demand, offsetting geopolitical tensions in the Middle East and the risk of output cuts in Libya and Iraq.
Brent was down 30 cents at US$59.43 a barrel by 0900 GMT. The North Sea crude oil futures contract fell 4.6 per cent last week in its biggest decline since the week ended Jan. 9.
US crude was up 15 cents a barrel at US$49.76. It closed down US$1.15 on Friday, ending a third week of declines. "More and more investors are coming to the conclusion that the market is awash with oil," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt."Unprecedented stocks levels cannot be ignored forever." Goldman Sachs analysts argued in a note to clients that oil prices would reverse recent gains due to rising global inventories. They forecast US crude would drop to around US$40 a barrel.
Oil producers in the Organization of the Petroleum Exporting Countries (Opec) have opted not to curb output, despite oversupply in many parts of the world, choosing to defend market share rather than try to support oil prices.
Opec Secretary-General Abdullah al-Badri has said the group should not cut output to "subsidise" higher-cost shale oil, now being produced in large quantities in North America.
Oil prices fell by 60 per cent between June 2014 and this January but recovered by almost a third between January and February on Middle East supply disruptions, strong winter demand and high refinery margins.
Fighting in several oil-rich countries has kept a lid on production and exports.
In Libya, up to 10 foreign workers are missing in the latest attack on oilfields by Islamist militants and there is a possibility they have been taken hostage, Czech and Libyan officials said on Saturday.
Yet many analysts see price weakness ahead. "Absent further unexpected Opec disruptions, we expect Brent oil prices and timespreads to reverse their recent strength," Goldman Sachs analysts said.