Oil dropped below $40 a barrel with a stronger dollar after the biggest surge since June following a surprise decline in US crude stockpiles.
Futures in New York slid 1.3% as the dollar rose, making commodities priced in the currency less appealing. Inventories fell last week to the lowest level since April, according to government data Wednesday, compared with the forecast for a gain in a Bloomberg survey. Meanwhile, the Federal Reserve signaled it would keep interest rates near zero for at least three years, although Chair Jerome Powell said he’s not sure if the robust recovery will continue.
Oil has clawed its way back to $40 a barrel this week despite bearish calls for the market from the International Energy Agency and industry players such as BP Plc and Trafigura Group. An OPEC+ committee meets Thursday to discuss if the group’s production cuts are enough to stave off a potential glut.
“Shrinking American crude stockpiles and the Fed’s gesture to aid the economic recovery have lifted prices, while a disruption to supply in the US from the storm has also done its part,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “But weak consumption remains a downside risk, setting oil for a rocky ride in the short term.”
OPEC+ still has work to do to bring laggards into line on the output agreement. While the United Arab Emirates signaled that it would make up for pumping too much oil in the past two months, Iraq is exporting more crude so far in September than its daily average in August.
The US supply picture remains mixed, despite stockpiles of gasoline falling for a sixth week and crude dropping by 4.4 million barrels. Distillate stockpiles are holding at the highest seasonal level in decades, while demand for diesel, often viewed as an economic barometer, is at the lowest since July.
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