Oil Declines on Dollar Strength, Rising U.S. Crude Stockpiles

  • Crude inventories increase for first time in six weeks: EIA
  • OPEC, Russia to discuss road map for output levels this month

OPEC's Already Driven Prices Up By $10: Yergin

Oil retreated as the dollar advanced to near a seven-month high and U.S. crude stockpiles climbed for the first time since August.

Futures slipped 0.2 percent in New York. The greenback rose the fourth time in five days against its peers, making dollar-denominated commodities less appealing to investors. U.S. crude supplies increased 4.85 million barrels last week, an Energy Information Administration report showed Thursday. OPEC took a step toward coordinated supply curbs with Russia this week and will meet for a “technical exchange” to set a road map for output levels later this month.

"The dollar is near a seven-month high, which puts some pressure on crude," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "Crude supplies rose last week. Even though the product supplies and Cushing were up, the report is basically bearish for crude oil."

Organization of Petroleum Exporting Countries ministers achieved their main goal this week at the World Energy Congress in Istanbul as Russia’s two largest oil producers agreed to comply with any government instructions to curb output following President Vladimir Putin’s backing on Monday for a supply deal. That leaves the success or failure of an accord involving producers of half the world’s oil in the hands of an OPEC committee, which will meet later this month to resolve disputes over how much Venezuela and Iraq should pump.

West Texas Intermediate oil for November delivery declined 9 cents to close at $50.35 a barrel on the New York Mercantile Exchange. The contract climbed 1.1 percent this week. Total volume traded was 27 percent above the 100-day average.

Greenback’s Advance

Brent for December settlement fell 8 cents to $51.95 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $1.20 premium to WTI for the same month.

The dollar advanced after a report showing U.S. retail sales rose by the most in three months bolstered the Federal Reserve’s case to raise interest rates by year-end. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose as much as 0.4 percent.

The gain left U.S. crude supplies at 474 million in the week ended Oct. 7, according to EIA data. Stockpiles remain at the highest seasonal level in more than 20 years. Supplies at Cushing, Oklahoma, the delivery point for U.S. oil futures, fell 1.32 million barrels to the lowest level this year.

Production Outlook

U.S. crude production fell by 17,000 barrels a day to 8.45 million, according to the EIA. Growth could resume quickly, according to Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. in Zurich.

"It’s quite interesting to see the upbeat sentiment in North American exploration and production and how quickly the cycle has turned,” Ruecker said. “At the beginning of the year everyone was focused on balance sheets and earnings. Now the focus seems to be on growth, so that’s a very, very, quickly spinning cycle."

The number of oil rigs operating in the U.S. climbed to the highest since February this week, rising by 4 to 432, according to Baker Hughes Inc.

Oil-market news:

  • Algeria’s OPEC governor Mohamed Hamel has been appointed chairman of the high-level committee set up to finalize details of the group’s deal to curb output, according to three people familiar with the matter.
  • RSP Permian Inc. agreed to pay $2.4 billion in cash and stock for Silver Hill Energy Partners amid increasing competition for drilling rights in the biggest U.S. oil field.
  • Kashagan, a vast oil field in the Caspian Sea, sent its first crude for export after about 16 years in development and more than $50 billion of investments.

— With assistance by Paul Burkhardt

    Before it's here, it's on the Bloomberg Terminal.