Oil futures tumbled under $44 a barrel to lose the bulk of the previous gains as investors assessed the impact of record crude stockpiles and a robust dollar.
US crude and benchmark Brent were down more than 2% each weighed on by the dollar’s rally against other currencies after recording its biggest slump in 18 months on Wednesday.
Light, sweet crude for April delivery slipped $1.84 or 4.1% to $42.82 a barrel on the New York Mercantile Exchange to remain on course for a 6 month low.
Brent, the global benchmark, slipped $1.61or 2.8% to $54.32 a barrel on the London-based ICE futures exchange in Europe.
Oil prices had gained on Thursday to buck the recent negative trend buoyed by a sharp decline in the value of the dollar against other currencies.
Analysts polled by the Wall Street Journal, however, warned that the prices would remain weak as the market fundamentals were yet to change as supply continued to outpace demand and the dollar continued to strengthen
“Fundamentals have not changed and just a short-term jolt in prices from the weakening US dollar will not change that fact. Prices are still going to stay low if demand and supply does not improve,” the Us Department of Energy warned.
The dollar slumped on Wednesday after the Federal Reserve indicated in its statement and in comments made by Chairwoman Janet Yedlin that I was not in a hurry to raise the lending rate for the first time since 2008.
The dollar, however, strengthened against other currencies Thursday with the Fed’s statement also having opened the door for a lending rate hike later in the year.
A lending rate would cause the dollar to strengthen hurting the prices of commodities priced in dollars by making them expensive to holders of other currencies.
“It’s dollar play all over again today,”Phil Flynn, analyst at the Price Futures Group in Chicago, told Reuters.
“The fact that the oil market is oversupplied is a given, so the only real variable now are currency moves and how they impact commodities demand.”
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