Oil Declines From Three-Month High as Dollar, Rig Count Increase

Oil fell from a three-month high as the dollar climbed, curbing investor appetite for commodities.

Futures retreated as the Bloomberg Dollar Spot Index rose from the lowest level since June. Losses accelerated after Baker Hughes Inc. data showed that the number of U.S. oil rigs climbed for the first time this year. Prices advanced earlier as U.S. oil production declines and central-bank policies improved the outlook for demand growth even as they pressured the dollar.

"Oil is going to slip when the dollar stops plunging," said Thomas Finlon, director of Energy Analytics Group LLC in Jupiter, Florida. "We’ve had a dramatic rally to highs for the year and it’s time for things to calm down for a bit. I don’t think this disrupts the overall trend at all, and we should soon resume the move higher."

West Texas Intermediate oil capped a fifth weekly gain, the longest run since May, amid speculation stronger demand and shrinking U.S. shale oil production will ease a global glut. The Federal Reserve signaled a slower pace of rate increases and Norway and Indonesia cut borrowing costs on Thursday, a week after the European Central Bank boosted stimulus. The Fed headlines sent the dollar lower, bolstering the appeal of commodities priced in the currency.

Oil Rigs

WTI for April delivery, which will expire Monday, slipped 76 cents, or 1.9 percent, to close at $39.44 a barrel on the New York Mercantile Exchange . It earlier touched $41.20, the highest since Dec. 4. Total volume traded was 38 percent above the 100-day average at 2:49 p.m. Prices rose 2.4 percent this week. The more-active May future dropped 52 cents to $41.14.

Brent for May settlement decreased 34 cents, or 0.8 percent, to $41.20 a barrel on the London-based ICE Futures Europe exchange. The contract climbed 2 percent this week. The North Sea crude closed at 6-cent premium to May WTI.

Rigs targeting oil in the nation’s fields rose by 1 to 387 this week, Baker Hughes said on its website Friday. The prior week’s number was the lowest since December 2009.

U.S. production dropped by 10,000 barrels a day to 9.07 million last week, according to an Energy Information Administration report on Wednesday. Stockpiles at Cushing, Oklahoma, the delivery point for WTI, increased by 545,000 barrels to a record while nationwide supplies remain at the highest level in more than eight decades.

Saudi Arabia will join a meeting of producers from within and outside the Organization of Petroleum Exporting Countries next month, adding weight to the campaign by financially stricken crude exporters to freeze output and cut the global glut. Qatar’s oil minister said that countries would meet in the nation’s capital of Doha on April 17, without providing details of who would attend.

Other news:

• The planned meeting next month on the output freeze will “consolidate agreements related to the stabilization and recovery of the market and price,” Venezuela’s President Nicolas Maduro said on state television.
• WTI may rise to $47 by June, supported by the oil producers’ freeze, low interest rates and falling U.S. shale output, Bank of America Merrill Lynch said in a note to clients Friday.
• U.S. crude production in February declined to an average 9.11 million barrels of crude a day in February, down 3.6 percent from a year earlier, the American Petroleum Institute said Thursday in a monthly report.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Jim Efstathiou Jr., Susan Warren

By: Mark Shenk

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