On Thursday, oil eased towards $64 barrel as record high U.S. production and growing inventories offset a weak dollar.
U.S. crude output reached a new record of 10.27 million barrels per day, according the Energy Information Administration on Wednesday. This resulted in the U.S. surpassing the production of Saudi Arabia.
Brent crude, the global benchmark, dropped 32 cents to $64.04 at 1208 GMT. U.S. crude was up 1 cent at $60.61.
“What we have now is a bit of a re-adjustment from the price rise we had yesterday, which was a bit overdone,” said Olivier Jakob, analyst. “I don’t think the data was that supportive,” he added, in regard to the Energy Information Administration’s inventory report.
The U.S. Energy Information Administration said that in the week to February 9, crude inventories increased by 1.8 million barrels. This increase was less than previous forecasts of analysts. Gasoline stocks grew by 3.6 million barrels, more than double of analysts’ forecasts.
On Thursday, the Saudi Energy Minister Khalid al-Falih commented that the Organization of the Petroleum Exporting Countries would do better to leave the market tight rather than put an end to the deal which would end the cut of output earlier than anticipated.
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“Khalid al-Falih gave his strongest hint yet that exiting the current supply agreement is unlikely to be on the agenda this year,” said Tamas Varga, an oil broker.
The deal established that the OPEC would reduce output by 1.8 million barrels per day, nearly 2 percent of global oil supply. The output cuts began a year ago and are scheduled to continue until the end of this year.
However, the rally in U.S. production which has been encouraged by the higher prices resulting from the OPEC-led cuts, is weakening the efforts to reduce global oil supplies. The EIA has predicted that U.S. production will surpass 11 million bpd before the end of this year, which is earlier than last month’s estimate.
The accelerated U.S. output also offset support from a weaker dollar, which plunged to a 15-month low versus the yen. A weaker greenback makes oil and other dollar-denominated commodities less expensive for owners of other global currencies.