NEW YORK (Reuters) - Oil settled little changed on Thursday after sliding to its lowest level in a week in volatile trade, but a surging dollar did not pressure prices below technical support levels as OPEC members told customers they would cut crude supplies.
Oil tumbled early as the dollar rallied near a 14-year high against a basket of other currencies the day after the Federal Reserve raised U.S. interest rates for the first time in a year. The Fed also hinted rates in 2017 could rise more quickly than investors had anticipated.
A stronger greenback pressures demand for dollar-denominated crude, making barrels more expensive for users of other currencies.
Brent futures for February delivery gained 12 cents, or 0.2 percent, to settle at $54.02 per barrel, while U.S. crude lost 14 cents, or 0.3 percent, to settle at $50.90, its lowest close in a week.
“It was hard for crude to pick a direction. The market declined earlier in the day on the strong dollar and reports this week that U.S. production was increasing,” said James Williams, president of energy consultant WTRG Economics in Arkansas, citing North Dakota’s production data.
“But crude ended little changed following a technical bounce and on continued reports that OPEC members were telling customers to expect delivery cuts,” Williams said.
Early in the session, Brent tested the $53 support level, falling as low as $53.15 a barrel, its lowest since Dec. 8.
“We saw some buying because there is too much optimism OPEC will cut output for Brent to trade below $53,” said Troy Vincent, an oil analyst at ClipperData in Louisville, Kentucky.
The Organization of the Petroleum Exporting Countries and other producers led by Russia have promised to cut output by almost 1.8 million barrels per day (bpd) to try to clear a global glut that has depressed prices.
National oil companies in Saudi Arabia, Kuwait and Abu Dhabi have told customers in Asia they would cut crude supplies following OPEC’s decision to cut output.
Saudi Arabia also told U.S. and European customers it would reduce oil deliveries, and traders said other OPEC members are expected to do the same.
“These delivery cut announcements provide psychological support that OPEC will follow through with their planned output cuts,” ClipperData’s Vincent said.
Still, in Libya, the restart of a pipeline leading to two key oil fields could add as much as 350,000 bpd of crude, challenging OPEC’s efforts to reduce supplies and boost prices.
Addition reporting by Christopher Johnson in London, Henning Gloystein and Keith Wallis in Singapore; editing by Jonathan Oatis