Oil Extends Drop as U.S. Stockpiles Climb and Dollar Strengthens

Oil extended its biggest decline in three weeks as U.S. data showed inventories and production both surged, while the dollar gained.

Futures in New York fell as much as 1.1 percent, after losing 3.6 percent in the previous two sessions. U.S. crude stockpiles last week rose to the highest level since December, while gasoline reserves expanded at four times the predicted rate. Meanwhile, data for November showed the shale boom drove U.S. output to a record.

Oil has erased most of the gains it made since the start of the year as growing stockpiles and rising U.S. production threaten efforts by the Organization of Petroleum Exporting Countries and its allies to curb a global oversupply. OPEC’s head will meet with American shale company executives for dinner on Monday in Houston as the group looks for ways to ensure the success of its supply-cuts policy.

Wednesday’s U.S. inventory data were “a bearish set, at least on a headline level,” said Torbjorn Kjus, chief oil analyst at DNB Bank ASA in Oslo. “Also we’ve seen a tight relationship with the dollar in the last two or three days.”

The Bloomberg Dollar Spot index gained as much as 0.3 percent on Thursday, making commodities priced in the U.S. currency less attractive.

West Texas Intermediate for April delivery lost 62 cents, or 1 percent, to $61.02 a barrel on the New York Mercantile Exchange at 1:05 p.m. London time. Prices slumped 2.2 percent on Wednesday for their biggest decline since Feb. 9. Total volume traded Thursday was about 18 percent above the 100-day average.

Brent for May settlement fell 58 cents to $64.15 on the London-based ICE Futures Europe Exchange, after dropping 2.7 percent on Wednesday. Front-month futures traded at a $3.11 premium to May WTI.

Inventory Growth

U.S. stockpiles of oil stored in tanks and terminals rose by 3.02 million barrels to about 423 million, the fourth increase in five weeks, according to the Energy Information Administration. That compares with a median estimate for a 3 million-barrel gain in a Bloomberg survey. Gasoline inventories expanded by 2.48 million barrels, more than the 600,000-barrel average estimate.

U.S. output reached a record high in November, surpassing Saudi Arabia late last year and nipping at the heels of Russia, the world’s largest producer. That’s helped boost American exports, with the combined shipments of crude, gasoline and distillates expanding to 7.3 million barrels a day in December, the largest volume ever in EIA data.

Other oil-market news:

Shale drillers have picked up the pace of buying protection against potential declines in oil and gas prices in 2018 and 2019, data from Bloomberg New Energy Finance’s Oil, Gas and Natural Gas Liquids Hedging Database show North Sea Buzzard oil-field production is still restricted below 100,000 barrels a day, according to people with knowledge of the matter. Iraq’s oil minister is scheduled to visit Moscow this month to meet Russian counterpart Alexander Novak and discuss Rosneft PJSC’s deals in Kurdistan, Russia’s Tass news service reported, citing Iraqi ambassador Haidar Mansour Hadi. Russia’s plan to underpin decades of oil and gas production by exploring its largely untapped coastal areas was pushed deeper into limbo as Exxon Mobil Corp. quit an offshore drilling venture with state-owned Rosneft.