Crude prices declined to wipe out gains from the previous two sessions after the dollar strengthened on positive jobs data from the US, and traders retrained their focus from the drawdown in supply to the crude and gasoline glut.
The dollar strengthened against other currencies in late morning trading after the US government released data showing that the number of people filing for jobless claims last week rose by a marginal 3000.
A stronger dollar reduces demand for dollar denominated commodities like oil as it makes them unaffordable for holders of other currencies.
Light sweet crude for June delivery slipped by $1.25 or 2.05% to $59.40 a barrel on the New York Mercantile Exchange to retreat from its highs since December 10 recorded on Wednesday.
Brent Futures, the global benchmark, was off by $1.36 or 2.01% to $6639 a barrel on the London-based ICE futures exchange.
While supply fell by more than 4 million barrels last week, the first decline in more than 15 weeks, inventories remain at a disappointingly high 487 million barrels despite the US approaching the peak driving season.
“There is some disappointment out there that the fundamentals for gasoline and oil products aren’t improving as quickly as some people would like, to provide support for the broader rally in crude that we’ve been seeing,” Carl Larry, director of business Development for oil and gas at Frost & Sullivan, told Reuters.
Also weighing down crude prices was uncertainty among traders on the impact of lifting economic sanctions on Iran on the oil market.
Iran oil minister reportedly said that the country would grow its oil production from 2.7 million barrels a day currently to more than 4 million barrels a day in less than 8 months if the economic sanctions are lifted.
“Iran is talking big,” Phil Flynn, senior market analyst at the Price Futures Group, told Market Watch.
“Obviously, that won’t happen anytime soon,” he added. ” Iran and six world powers must reach a final agreement by June 30.”
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