Oil Price Slips on Dollar Strength

Oil Price Slips on Dollar Strength

The FINANCIAL -- Oil prices were marginally down on May 15 on a stronger dollar and lingering concerns about the global glut of oil, according to Nasdaq.

Brent crude for June delivery fell 0.2% to $66.60 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in June were recently trading 0.5% lower at $59.57 a barrel.

"Crude oil prices continue to remain very sensitive to the U.S. dollar movements," said Myrto Sokou, analyst at Sucden Financial. The Wall Street Journal Dollar Index, which tracks the dollar against a basket of other major currencies, rose 0.3%. As it is priced in dollars, oil becomes less attractive to holders of other currencies when the greenback appreciates.

Market participants were also bracing for the release of the latest U.S. oil drilling rig numbers later on May 15.

The rig count--a proxy for activity in the industry--is down 58% since a peak in October, according to Baker Hughes Inc. The decline, however, has slowed in recent weeks and some shale producers say they are ready to add rigs in the coming months if prices stabilize.

Oil prices were further pressured by continuing concerns about the global oversupply.

Futures have rebounded by about 40% in recent months from their lows earlier in the year. Analysts, however, say the global supply-and-demand balance hasn't changed significantly to support such a price increase.

Recent data point to "still loose underlying fundamentals despite price optimism," analysts at UBS said in a note to clients. "It is still early with no obvious signs of physical market tightening."

Earlier this week, the International Energy Agency said that while it expects U.S. shale-oil output growth to show signs of slowing, other producers like Russia and Saudi Arabia continue to ramp up production.

Oil prices largely shrugged off an incident involving an oil tanker in the Middle East. Iranian patrol boats on Thursday opened fire on a Singapore-flagged vessel as it moved through the Strait of Hormuz. The incident raised new concerns about Iran's attempts to exert more control of commerce in the Persian Gulf.

This is the second time in two weeks that Islamic Revolutionary Guard Corps naval patrol boats have confronted a commercial ship moving through the strait, according to U.S. officials.

"The fact that the market is no longer reacting euphorically to such news could indicate that the price rally--for which there is little fundamental justification--is running out of steam," said analysts at Commerzbank.

Nymex reformulated gasoline blendstock for June--the benchmark gasoline contract--fell 0.6% to $2.0460 a gallon, while ICE gas oil for June changed hands at $609.50 a metric ton, down $4.75 from Thursday's settlement.