Oil dropped below $50 a barrel as a stronger dollar eroded gains ahead of U.S. government data on crude stockpiles.
Futures fell as much as 0.9 percent in New York after climbing 9.6 percent the previous six sessions. The dollar rose as much as 0.2 percent, reducing the appeal of commodities denominated in the currency. U.S. oil inventories probably fell by 3.3 million barrels last week for a fifth weekly drop, according to a Bloomberg survey before a report from the Energy Information Administration Wednesday. Stockpiles have lost almost 26 million barrels since the end of June.
Oil earlier climbed above $50 a barrel for the first time since May amid optimism that output curbs by the Organization of Petroleum Exporting Countries and its allies are rebalancing the market and trimming global inventories. U.S. crude imports from OPEC slid 2.6 percent in May from April and shipments from the group may fall further this month as Saudi Arabia deepens cuts.
After six days of price gains “some kind of downside correction” should be expected, Tamas Varga, an analyst at PVM Oil Associates, said by phone. If a decline in U.S. inventories is confirmed, “we’re probably going to have steady numbers going into tomorrow.”
West Texas Intermediate for September delivery was at $49.78 a barrel on the New York Mercantile Exchange, down 39 cents, at 1:25 p.m. London time. Total volume traded was about 12 percent above the 100-day average. The contract gained 0.9 percent to $50.17 on Monday.
Brent for October settlement dropped 50 cents to $52.22 a barrel on the London-based ICE Futures Europe exchange, and traded at a $2.34 premium to WTI for the same month. The September contract expired Monday after advancing 13 cents to $52.65.
Iran’s oil exports grew 45,000 barrels a day in July compared with June, with the country shipping more than 2.2 million barrels a day to Asian and European markets last month. U.S. inventories remain about 90 million barrels above the five-year average, according to the EIA. The nation pumped 9.41 million barrels a day through July 21, near the highest level since 2015. A U.S. ban on Venezuelan trade would lead to a reshuffling of oil flows with likely limited impact on prices, according to Goldman Sachs Group Inc. Saudi Arabia is considering a flexible tax system for state-owned oil company Aramco that would increase royalty payments when crude prices rise, according to people familiar with the deliberations. BP Plc Chief Financial Officer Brian Gilvary says oil prices will “ drift back down” toward $50 a barrel by the end of 2017 and “somewhere around $45 to $55” in 2018.