Oil slides, hits 2-week low on worries about dollar, crude supply

NEW YORK: Oil fell more than 1 percent on Thursday, hitting two-week lows on pressure from a strong dollar and worries that surging U.S. crude output might thwart OPEC's efforts to drain global supply.

Rebounding stock prices on Wall Street helped crude futures bounce off the day's lows, as stocks and oil futures have been more highly correlated in recent weeks. Stocks turned higher after Federal Reserve chair Jerome Powell's comments to Congress eased fears of faster interest rate hikes.

Brent crude and U.S. West Texas Intermediate (WTI) crude fell by more than $1 a barrel. Brent, the global benchmark, lost $1.22, or 1.9 percent, to $63.52 a barrel as of 10:51 a.m. EST (1551 GMT), after sliding as low as $63.19. U.S. crude was down $1, or 1.6 percent, to $60.66 a barrel, after touching a low of $60.18.

The session lows for both benchmarks were the lowest prices in two weeks.

Wednesday's weekly data showed a larger-than-expected increase in U.S. crude inventories and a rise in gasoline stocks. U.S. crude slipped in the last month of 2017, but in November it hit an all-time high of 10.057 million barrels per day (bpd), the government said. Weekly data showed another record and further gains are expected.

"Yesterday's report...has reawakened concerns that U.S. production levels will offset OPEC production cuts," said Gene McGillian, manager of market research at Tradition Energy in Stamford.

The stronger dollar makes commodities denominated in the U.S. currency more expensive for holders of other currencies. The dollar index hit a near six-week high on Thursday following consumer inflation figures showing the largest gain in 12 months.

OPEC officials will meet U.S. shale executives at a U.S. energy conference on Monday, underlining the influence of American output on global prices.

"The standoff 'shale versus sheikh' continues to frame the oil market, with the former again gaining the upper hand," said Norbert Ruecker, head of macro and commodity research at Julius Baer. "We see more downside for oil."

OPEC's cut, which began a year ago, has helped boost prices from levels below $30 seen in January 2016. Producers are sticking to the deal and an involuntary drop in Venezuelan output has further boosted compliance.

A Reuters survey on Wednesday found OPEC production fell in February to a 10-month low.