Crude prices declined for the third straight day on Friday, their longest losing streak in more than eight weeks, on a stronger dollar and concern that the recent rally will encourage the major producers to ramp up production sustaining the global glut.
The three day decline was triggered by separate reports by the US Energy Information Administration and the International Energy Commission which reported a reduction in the number of active refineries in the US and that the major producers were planning to raise crude output respectively.
“With crude prices over $60, it invites producers back into production,” Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, told Bloomberg.
“Production will recover. The trend that will emerge in the near term will likely be downward.”
Light Sweet Crude for June delivery most recently lost 60 cents or 1% at $59.27 a barrel on the New York Mercantile Exchange.
The American benchmark is struggling to record having drifted in the red for the week in midday trading. The contract has logged nine straight weekly gains and another gain would mark its longest winning streak in 30 years.
Brent Futures, the global benchmark, was most recently down by 12 cents or 0.2% at $66.58 on the London Based ICE Futures Exchange.
Based on the most active contracts, the European benchmark is more than 1.8% up on the week.
Also weighing the prices down, was a stronger dollar against a basket of other foreign currencies.
The dollar strengthened on Friday on expectations that the US Federal Reserve would raise the country’s lending rates sooner than expected after a batch of weaker than expected economic reports.
According to the Wall Street Journal, stronger dollar is bearish for oil demand as it makes oil and other commodities denominated in dollars more expensive for holders of foreign currencies.
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