Oil prices slide on dollar strength and OPEC+ supply expectations

NEW YORK — Oil prices fell on Friday as the US dollar rose, while forecasts called for crude supply to rise in response to prices climbing above pre-pandemic levels.

US West Texas Intermediate (WTI) crude futures settled $2.03 or 3.2% lower at $61.50 per barrel.

Brent crude futures for April, which expired on Friday, fell 75 cents in the session, or 1.1%, to settle at $66.13 a barrel. The more actively traded May contract slipped by $1.69 to $64.42.

The dollar rose as US government Treasury bond yields held near one-year highs, making greenback-priced oil more expensive for holders of other currencies.

However, Brent rose 4.8% and WTI ended up 3.8% on the week, and both were about 20% higher in the month on supply disruptions in the United States and optimism over demand recovery on the back of COVID -19 vaccination programs.

“It’s a dicey time — it doesn’t seem like a time to load up on a risk-asset position,” said Bob Yawger, director of Energy Futures at Mizuho in New York, wary of a potential output increase from OPEC and allies at next week’s meeting.

Also, the US crude stockpile report last week showed a surprise build in oil inventories.

Investors are betting that next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies, a group known as OPEC+, will result in more supply returning to the market.

US crude production fell in December, the latest month for which data is available, according to a monthly report from the Energy Information Administration.

Despite talk of tightening fundamentals, the demand side of the market is nowhere near warranting current oil price levels, some analysts said.

US crude prices also face pressure from slower refinery demand after several Gulf Coast facilities were shuttered during the winter storm last week.

Refining capacity of about four million barrels per day (bpd) remains shut and it could take until March 5 for all capacity to resume, though there is risk of delays, analysts at JPMorgan said in a note last week.

Hedge funds and other money managers raised their net long US crude futures and options positions in the latest week to Feb. 23, the US Commodity Futures Trading Commission (CFTC) said. —