Oil prices fall on oversupply concerns

[NEW YORK]Oil prices retreated on Thursday on concerns the market has risen too much given lofty supplies.

US benchmark West Texas Intermediate for June delivery shed 62 cents at US$59.88 a barrel on the New York Mercantile Exchange.

European benchmark Brent crude oil for delivery in June lost 22 cents at US$66.59 a barrel in London.

Data showing modestly lower US crude inventories amid drilling industry cutbacks have helped push oil prices up about 40 per cent since the commodity skidded below US$45 a barrel in mid-March.

But US supplies are still high, with oil production above 9.3 million barrels a day, the highest level since the 1970s, analysts said.

"The market's basically beginning to stall," said Gene McGillian, broker and analyst at Tradition Energy.

"If we don't see a better pickup in demand, or signs that production levels are actually starting to come down, the market's going to pull back." Tim Evans, analyst at Citi Futures, cited data showing an 800,000 barrel a day rise in production from Opec countries as a drag.

The rise in oil prices since mid-March is "an upward correction in price rather than the beginning of a sustained bull market," Mr Evans said.

Thursday's retreat came despite a fall in the dollar. A lower greenback usually promotes higher oil prices because it makes dollar-denominated oil cheaper for buyers using other currencies.

"Oil's recent price performance has been relatively weak given the decline in the dollar, and in our view this warns that the market is heavy," Mr Evans said.

AFP