Oil market extends losses under stronger dollar

A motorist filling up petrol at a pump kiosk. (AFP/Fadel Senna)

NEW YORK: World oil prices finished lower in choppy trade on Wednesday (May 27) as the strong dollar weighed and a potential rise in Iraq exports heightened global oversupply worries.

US benchmark West Texas Intermediate for delivery in July fell 52 cents to US$57.51 a barrel on the New York Mercantile Exchange. Brent North Sea crude for July, the global benchmark, tumbled to US$62.06 a barrel in London trade, down US$1.66 from Tuesday's settlement.

The market pulled up in early trade but gains evaporated as the dollar strengthened slightly, touching its highest level in nearly a month against other major currencies, making dollar-priced crude oil more expensive.

The market may be undergoing "a bit of book squaring ahead of US petroleum inventory data," said Tim Evans of Citi Futures.

The Department of Energy's weekly petroleum report, usually released on Wednesdays, will be issued on Thursday due to a public holiday on Monday. Analysts expect that crude inventories fell for a fourth consecutive week, by 2.0 million barrels, according to a survey by Bloomberg News. The stockpiles currently stand at 482.2 million barrels, just below their highest levels on record.

Traders have been hoping that a slowdown in US output, coupled with increased demand during the summer driving season, could ease the global oversupply, a key factor in driving prices of more than 50 percent between last June and January.

Concerns about a potential rise in Iraqi oil exports also cast a cloud over the supply outlook, said Commerzbank.

"Iraq may flood the oil market with additional oil next month: according to shipping programs, Iraqi oil exports are set to soar by 800,000 barrels per day month-on-month and achieve a new record level of 3.75 million barrels per day," the German bank said in a research note. "If this actually comes to pass, the oversupply risks becoming even bigger."