Oil falls as dollar strengthens, ample supply weighs

Tue May 26, 2015 3:29pm EDT
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By Robert Gibbons

NEW YORK (Reuters) - Oil prices fell nearly 3 percent on Tuesday as the dollar's rally weighed on dollar-denominated crude oil futures along with concerns that a recent rally might keep U.S. producers active.

The U.S. dollar index rallied as Greece's financial crisis and signs of increasing opposition to austerity in Spain pressured the euro.

"Pressuring oil is the dollar's strength on the concerns about Greece being able to make its debt payments and the U.S. Federal Reserve seeming to be closer to raising rates," said Phil Flynn, analyst at Price Futures Group in Chicago.

Friday's weekly data showed U.S. drillers cut the number of rigs by just one last week and Goldman Sachs said prices were at a level that would spur activity, adding to a growing list of headwinds crude faces that include rising OPEC supply.

On Sunday, Iran said the Organization of the Petroleum Exporting Countries (OPEC) was unlikely to change its production ceiling at its meeting on June 5.

Brent crude for July delivery fell $1.80, or 2.75 percent, to settle at $63.72 a barrel, the weakest settlement since April 22. Tuesday's $63.29 intraday low was the lowest Brent price since it fell to $62.88 on April 23.

U.S. July crude fell $1.69, or 2.83 percent, to settle at $58.03, having traded as low as $57.71.

"The main factor weighing on prices is the significantly appreciating U.S. dollar," said Carsten Fritsch, analyst at Commerzbank. "What is more, the decline in drilling activity in the U.S. that has been ongoing for 23 weeks appears to have stopped."   Continued...

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado February 2, 2015. REUTERS/Rick Wilking