Oil prices plummeted sharply in European trade on Thursday, adding to overnight losses. A stronger U.S. dollar and an unexpected upsurge in U.S. crude inventories promoted selling.
The greenback rallied to seven-week highs in early trade after the minutes of the Federal Reserve’s recent policy meeting triggered possibilities for an interest rate increase in June.
Dollar-denominated oil futures contracts tend to decline when the dollar rallies, as this makes crude more expensive for non-U.S. buyers. Crude oil for June delivery on the New York Mercantile Exchange dipped 1.49% to trade at $47.47 per barrel by 08:00 GMT.
New York-traded oil futures rose to $48.95 a day earlier, the highest level since October 12, before declining after data revealed that oil supplies in the United States registered an unexpected increase.
In its weekly report, the U.S. Energy Information Administration stated that crude oil inventories surprisingly climbed by 1.31 million barrels in the previous week to 541.3 million. A stock decline of 2.833 million barrels was expected by market analysts.
Nymex oil prices are almost up 80% since dropping to 13-year lows at $26.05 on February 11.
Meanwhile, Brent oil for July delivery shed 1.57% to $48.14 a barrel on the ICE Futures Exchange in London. Brent futures prices are up by nearly 85% since shortly declining below $30 a barrel in mid-February. This was despite the collapse of talks at a Doha summit in April set at achieving an output freeze among OPEC and non-OPEC producers. Brent’s premium to the WTI crude contract settled at 67 cents a barrel, compared to a difference of 74 cents by Wednesday’s close.
OPEC will meet on June 2 in Vienna and is possibly going to discuss the freeze initiative once more.