Oil slides on strong dollar, supply glut worries

Oil prices sank this week to one-month lows on the back of the strong dollar and global supply glut fears, ahead of the OPEC cartel output this week.

The rising greenback makes dollar-denominated commodities more expensive for holders of other currencies. That tends to dent demand and prices.

Meanwhile the Organization of the Petroleum Exporting Countries (OPEC), which pumps about 30 percent of global crude, meets on June 5 for a production gathering in Vienna.

London Brent oil dived to a six-week low and New York crude to a four-week trough as the market was shaken once more by the rebounding dollar and stubborn jitters over the global supply glut.

The US government’s Department of Energy (DoE) revealed a healthy decline in crude oil and gasoline reserves, but also a rise in output that could aggravate the global oversupply.

The report showed US commercial crude inventories fell 2.8 million barrels to 479.4 million in the week through May 22, while gasoline stockpiles fell 3.3 million barrels.

The DoE also reported a rise in US crude production last week, by 304,000 barrels per day to 9.57 million.

Dealers have been hoping a slowdown in US output, and increased demand during the summer driving season, could whittle down the huge global supplies that were a key reason for the collapse in prices between June 2014 and January this year.

Those losses deepened in November after OPEC refused to cut output despite a global glut.

This week, the market focus switches back to OPEC, whose official oil output target stands at 30 million barrels per day. Market expectations are that OPEC will maintain its output levels once again, due to satisfaction at oil prices that have recovered significantly since February.