Brent crude oil fell back to $55 a barrel on Thursday after Kuwait said OPEC had no choice but to keep production steady, refocusing the market on global oversupply as the dollar recovered from sharp losses in the previous session.
Brent had rallied by more than $2 a barrel on Wednesday after the Federal Reserve indicated it would raise U.S. interest rates slower than previously thought, overshadowing data showing U.S. crude stocks at a record level.
The dollar fell by its most in six years after the comments from the Fed, boosting oil and metals priced in the greenback as they became cheaper for holders of other currencies. But on Thursday, the dollar snapped back by more than 1 percent.
Brent for May delivery was down 98 cents at $54.93 a barrel by 1134 GMT, having hit a low for the session of $54.87 and after rising almost 4.5 percent on Wednesday. Brent fell from highs above $115 last June to near $45 in January.
U.S. crude for April delivery fell by $1.65 or more than 3 percent to $43.01 a barrel, after hitting $42.91, close to a six-year low. Its discount to Brent stood just below $10 a barrel.
Kuwait’s oil minister said on Thursday he was concerned by the 50 percent drop in oil prices since June because of its impact on the Gulf Arab state’s budget, but said OPEC had no choice but to keep output steady.
“We don’t want to lose our share in the market,” Ali al-Omair told reporters.
The Organization of the Petroleum Exporting Countries decided in November to maintain production levels even if it meant lower prices, as the group feared fast-growing U.S. shale output threatened its position.
While higher-cost U.S. production is expected eventually to be slowed by the drop in price, so far output has continued to rise, boosting crude inventories to their highest-ever level.
U.S. crude stocks rose by a further 9.6 million barrels last week, data from the Energy Information Administration showed, while stocks at the U.S. benchmark contract’s delivery point in Cushing, Oklahoma hit the highest on record.
A pushback in the timing of U.S. interest rate increases could give oil producers more breathing space for financing, Daniel Ang, an analyst at Phillip Futures, said in a note.
“Oil producers (will be) able to expand their businesses or even tide across this period of low prices with cheaper financing,” Ang wrote. (Additional reporting by Jessica Jaganathan in Singapore; Editing by Dale Hudson and Susan Thomas)