An oil refinery in the Gulf emirate of Qatar. Traders are pinning their
hopes on a tightening global market ahead of this week's OPEC meeting.
PHOTO | FILE
Federal Reserve Chair Janet Yellen said Friday that the US economy is improving enough to support an interest rate increase "probably in the coming months", raising the possibility of a rate hike in June or July.
The dollar was up against all major currencies as markets digested the news. A stronger greenback makes dollar-priced oil more expensive, denting demand and hurting prices.
In Canada, Suncor Energy Inc has restarted production which was disrupted because of wildfires in the area. The blaze halted production of more than 1 million barrels a day.
At about 0630 GMT, North Sea Brent for July dipped 24 cents to $49.08 while US benchmark West Texas Intermediate for July delivery fell 13 cents to $49.20 a barrel.
Brent crude last Thursday topped $50 a barrel for the first time this year as production disruptions in Canada and Nigeria eased short-term concerns about abundant global supplies.
In early 2016, oil prices had nosedived to around $27 from above $100 a barrel two years ago, owing largely to a stubborn supply glut.
"The fact that crude prices are not below $49 means that there is still demand-buying in terms of crude futures... Maybe the investors are starting to be more optimistic about the path of oil," IG Markets analyst Bernard Aw told AFP.
"But because the dollar has gone up so much, trying to break above the fifty-dollar mark will be even more difficult now."
Traders are now looking to a June 2 meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna where it is hoped a deal on reducing production can be reached.
But analysts are sceptical. This will be the first OPEC meeting for Saudi Arabian Energy Minister Khalid al-Falih, who took over the ministry earlier this month.
He is a close ally of prince Mohammed bin Salman, who has been outspoken about not reducing oil production to defend market share.
"Going into the meeting, there's a bit of an aggressive tone (from Saudi Arabia), so that's probably not going to sit well with the rest of OPEC," said Aw.
Talks in Doha last month involving OPEC members and other major producers such as Russia failed to reach a deal to cap production.
Meanwhile, Iran has said it has no plans to join any output freeze by other major crude producers after returning to world oil markets in January with the lifting of Western sanctions.
"It seems like nothing much is going to come out of it. The hopes that they are going to come up with any agreement to support oil prices are quite slim," Aw added
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