Oil slides more than 3 percent on dollar rally, glut worry

Tue May 19, 2015 5:28pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell more than 3 percent on Tuesday, with U.S. crude extending losses for a fifth straight day as the dollar rallied and on evidence that the United States and top oil exporter Saudi Arabia were pumping more than the world needed.

North Sea Brent and U.S. crude settled down more than $2 a barrel each as the dollar hit two-week highs against a basket of currencies .DXY, making crude and other dollar-denominated commodities less affordable for holders of currencies such as the euro.

The sell-off in oil came ahead of Tuesday's end-of-business expiry in U.S. crude's front-month contract, which often results in unusually heavier market activity. Volume in U.S. crude's July contract CLN5, the new front-month from Wednesday, was markedly higher than the expiring June contract CLM5, Reuters data showed.

"There is certainly a degree of profit-taking going on today before the expiry of the June contract, but it's primarily driven by the dollar's strength," said Sal Umek of the Energy Management Institute in New York.

Brent LCOc1 fell $2.25 to $64.02 a barrel while U.S. crude's front-month contract CLc1 settled down $2.17 at $57.26.

The market also tumbled even though traders expected an industry report to cite a third straight weekly decline in U.S. crude stockpiles.

Brent pared some of its losses after settlement, when the American Petroleum Institute (API) said crude inventories fell 5.2 million barrels last week, much more than the drop of 1 million barrels that analysts had expected. Official inventory numbers are due on Wednesday from the U.S. government.

But Umek said oil remained fundamentally weak from oversupply.   Continued...

A person fills up a vehicle with fuel at a Haffner's gas station in Lowell, MassachusettsDecember 15, 2014. REUTERS/Brian Snyder