Published: Mon, June 04, 2018
Finance | By Gustavo Carr

Oil retreats on stronger dollar; U.S. crude discount widens

Oil retreats on stronger dollar; U.S. crude discount widens

The U.S.is on pace to overtake Saudi Arabia and Russian Federation as the world's largest oil producer.

The president's comments boosted the dollar and sparked selling in dollar-denominated commodities, said John Kilduff, a partner at Again Capital Management.

Brent crude was down 38 cents, or 0.5 percent, at $77.12 per barrel at 0643 GMT, after settling the last session up 2.8 percent.

The discount between United States and Brent crude has now blown out to around $US11 a barrel, the largest it has been since mid 2015 and a sign the growing production and bottlenecks in pipelines and storage is now capping price growth and indeed putting downward pressure on U.S. prices.

Meanwhile, West Texas Intermediate (WTI) crude was down 17 cents, or 0.25 per cent, to Dollars 66.87, while Brent crude eased 8 cents, or 0.10 per cent, to USD 77.48 a barrel on the New York Mercantile Exchange.

Brent crude dropped from $80 per barrel on Wednesday last week to $75 on Monday when Opec revealed its intention to increase supply to the market, plugging the gap left by missing Iranian oil and declining production in Venezuela.

Crude stocks at the Cushing, Oklahoma, delivery hub for WTI fell 556,000 barrels, EIA said.

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Concerns about growing USA crude production and a glut trapped inland due to a lack of pipeline capacity have pressured prices of WTI, doubling its discount to Brent over the course of a month. According to services group, Baker Hughes, another 2 rigs were activated last week to look for oil in the USA, taking the figure to 861 last week, the highest for more than three years.

For the week, WTI was on track for a 1.5% fall, adding to last week's near 5% decline, while Brent was set to rise 1.3%, widening the spread between the two benchmarks.

"Until transportation is incentivized to get crude to the coasts or production is shut in, "we're going to continue to see some weakness in WTI", Smith said". That was the eighth time drillers added rigs in the past nine weeks.

Baker Hughes will release a weekly report on the number of drilling rigs in the U.S. Last week, the U.S. oil producers increased the number of drilling rigs by another 15 to 859, which was the maximum value since March 2015.

Speculators in Brent crude cut their net long positions in the week by 49,638 contracts to 451,966.

According to the latest available figures by OPEC's secondary sources-the ones that OPEC uses to measure quotas and compliance with the deal, OPEC's production in April increased by 12,000 bpd over March, to average 31.93 million bpd, as Saudi Arabia boosted its production by 46,500 bpd. Brent recovered some ground, however, when a Gulf source flagged that any rise in production would be gradual.

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