Oil prices tumbled again Monday on a pick-up in drilling and a strong dollar as speculation swirled that the Federal Reserve could hike interest rates as soon as this month.
The commodity plunged Friday, wiping out the previous day’s rally as analysts said a sharp fall in US inventories last week was likely a one-off caused by import cutbacks as Hurricane Hermine ploughed through the Gulf of Mexico.
Remarks from two top Fed officials Friday backing a lift in borrowing costs also dragged on the market as the dollar rallied, making crude more expensive for anyone holding weaker units.
US West Texas Intermediate fell 81 cents to $45.07 Monday, while Brent tumbled 75 cents to $47.26. Both contracts collapsed almost four percent Friday.
News that oil firms had opened up more rigs to drill fuelled expectations US output would increase, at a time when demand remains weak.
“The market is still in surplus and there are high inventories, so we could see oil decline further from here, perhaps back to the low $40s,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney, told Bloomberg News.
“If OPEC can get their act together and agree on a deal, it could trigger a bit of short covering.”
Traders are awaiting a meeting this month of key producer Russia and the OPEC exporters club to address a global supply glut and overproduction crisis that has battered prices for the past two years.
However, while there have been soothing words from officials, analysts are sceptical that any deal will be struck at the gathering in Algiers.