Oil Falls to Three-Month Low on Stronger Dollar, U.S. Supply

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Oil declined to a three-month low in New York as the dollar strengthened against the euro and U.S. crude stockpiles stayed above the seasonal average.

The dollar gained after European Central Bank President Mario Draghi reiterated his commitment to providing unprecedented stimulus to the euro area. While U.S. crude inventories declined last week, supplies remain almost 100 million barrels above the five-year average.

Oil’s rebound from a six-year low has faltered amid economic uncertainty in China and Greece and speculation that the removal of sanctions against Iran will add to a global glut. The full impact of higher Iranian exports won’t be felt until 2016 as the nuclear deal is implemented, banks including Goldman Sachs Group Inc. predict.

“The rising dollar is a real concern,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion. “Iran is a headwind. We still have plenty of oil in the U.S.”

West Texas Intermediate for August delivery fell 50 cents, or 1 percent, to $50.91 a barrel on the New York Mercantile Exchange, the lowest close since April 9. It’s down 14 percent in July.

U.S. Supplies

Brent for August settlement, which expired Thursday, was 46 cents higher at $57.51 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $6.60 to WTI. The more-active September contract fell 20 cents to $56.92.

Total U.S. inventories declined by 4.3 million barrels to 461.4 million last week, the first drop in three weeks, the Energy Information Administration said Wednesday. Supplies at Cushing, Oklahoma, the delivery point for U.S. benchmark oil, rose by 438,000 barrels to 57.1 million for a third weekly gain, according to the EIA.

U.S. refineries used 16.8 million barrels a day of crude last week, up 229,000 from the previous period and the most in data going back to 1982.

“Refining activity in the U.S. is at its peak, but demand will inevitably slow down as the summer season ends,” Giovanni Staunovo, an analyst at UBS Group AG, said Thursday by phone from Zurich. “There are signs of increasing investment activity among producers, which could weigh on oil prices.”

Iran Production

Iran, the fourth-biggest member of the Organization of Petroleum Exporting Countries, won’t achieve a crude-export boost of more than 500,000 barrels a day, or about 50 percent, until next year, according to banks including Goldman, Citigroup Inc. and Commerzbank AG. Iran and six world powers reached an accord on July 14, after almost two years of talks, that will remove sanctions on its oil industry if the country scales back nuclear activities.

The Buzzard field in the North Sea halted production Thursday, according to two people with knowledge of the operations. The field, which feeds crude into the Forties pipeline system, produced about 180,000 barrels a day last year, according to data from the U.K. Department of Energy and Climate Change.