NEW YORK (Reuters) - Oil prices fell more than 1 percent on Monday, retreating from the sharp rally of the previous session, on the impact of a strong dollar and worries of stubbornly high supplies as OPEC prepared to meet this week to stick to production targets.
The Organization of the Petroleum Exporting Countries pumped at a two-and-a-half year high of 31.22 million barrels of oil per day (bpd) in May, a Reuters monthly survey showed. [OPEC/O]
The boost from OPEC puts output further above its target of 30 million bpd, underlining the focus of top exporter Saudi Arabia and other key members on market share.
The group meets on Friday and is expected to maintain its current production policy, keeping the world oil market amply supplied for the foreseeable future.
“OPEC continues to produce well above target, and also well above demand for its oil,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Brent crude oil futures LCOc1, fell $1.06, or 1.6 percent, to $64.50 a barrel by 11:21 a.m. EDT (1521 GMT. U.S. crude CLc1 was down 73 cents, or 1.2 percent, at $59.57 a barrel
Both benchmarks had jumped 5 percent on Friday, their strongest gain in 1/-1/2 months, amid a stall in the dollar’s .DXY rally.
The dollar, which has surged lately on speculation of a U.S. rate hike before the year end, hit session highs on Monday after stronger-than-expected U.S. construction spending and Greek debt woes.
A strong greenback makes dollar-denominated commodities, such as oil, less affordable for holders of other currencies like the euro.
“The dollar’s exerting it’s strength and the noise around OPEC is generating into weaker sentiment,” said Phil Flynn, analyst at the Price Futures Group in Chicago. “That said, demand for crude and rig cuts on the U.S. side continue to be better than thought.”
Improving U.S. demand for crude amid a seasonal peak in the country’s road travel mitigated some of the market’s downside, said traders. Data from market intelligence firm Genscape showed a draw of more than 1.1 million barrels between Tuesday and Thursday at the Cushing, Oklahoma delivery point for U.S. crude futures, market sources said.
Some noted that the U.S. oil rig count posted new declines last week, against expectations of a rise, which signalled recent price rebounds have not yet prompted drillers to rush into putting new wells into operation [RIG/U]
Goldman Sachs however sounded a bearish note, saying U.S. oil production was on track to grow 155,000 bpd day in the fourth quarter compared with the same period in 2014, despite falling rig counts.
Additional reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Marguerita Choy