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Oil slides on strong dollar, supply glut worries
[LONDON] Oil prices sank this week to one-month lows on the back of the strong dollar and global supply glut fears, ahead of the Opec cartel output meeting next week.
The rising greenback makes dollar-denominated commodities more expensive for holders of other currencies. That tends to dent demand and prices.
Meanwhile the Organisation of the Petroleum Exporting Countries (Opec), which pumps about 30 per cent of global crude, meets on June 5 for a production gathering in Vienna.
London Brent oil dived to a six-week low and New York crude to a four-week trough on Thursday, as the market was shaken once more by the rebounding dollar and stubborn jitters over the global supply glut.
"Brent and WTI futures have been set for a monthly decline as the strong dollar dominates the oil market," said Sucden analyst Myrto Sokou.
"Crude oil inventories have started to decline since mid-April 2015, suggesting a possible recovery of the US oil demand.
"However, the strong dollar seems to limit any strong gains in the oil market for the time being."
The US government's Department of Energy (DoE) revealed Thursday a healthy decline in crude oil and gasoline reserves - but also a rise in output that could aggravate the global oversupply.
The report showed US commercial crude inventories fell 2.8 million barrels to 479.4 million in the week through May 22, while gasoline stockpiles fell 3.3 million barrels.
The DoE also reported a rise in US crude production last week, by 304,000 barrels per day to 9.57 million.
Dealers have been hoping a slowdown in US output, and increased demand during the summer driving season, could whittle down the huge global supplies that were a key reason for the collapse in prices between June 2014 and January this year.
Those losses deepened in November after Opec refused to cut output despite a global glut.
Next week, the market focus switches back to Opec, whose official oil output target stands at 30 million barrels per day.
Market expectations are that Opec will maintain its output levels once again, due to satisfaction at oil prices that have recovered significantly since February.
By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in July dropped to US$64.35 a barrel compared with US$65.57 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for July fell to US$58.52 a barrel from US$59.60 a week earlier.
Gold slid to a three-week low at US$1,180.15 per ounce, taking a heavy knock from the rising greenback.
"Gold has been absolutely battered," said analyst Fawad Razaqzada at trading site Forex.com.
"The considerably stronger dollar is chiefly responsible for this latest slide in the price of gold and other buck-denominated commodities." The dollar has risen following some positive US economic data and comments from Federal Reserve chief Janet Yellen last week that rates would go up "at some point this year".
By Friday on the London Bullion Market, the price of gold dipped to $1,191.40 an ounce from $1,204 the previous week.
Silver stood at US$16.67 an ounce from US$17.25.