Oil drops on surging dollar, rising U.S. crude stocks, jump in Iran exports

By Henning Gloystein
SINGAPORE, May 19 (Reuters) - Oil prices fell early on
Thursday, pulled down by rising U.S. crude inventories, a
stronger dollar and surging output from Iran to Europe and Asia.
International Brent crude futures LCOc1 were trading at
$48.28 per barrel at 0101 GMT, down 65 cents or 1.3 percent from
their last settlement.
U.S. West Texas Intermediate WTI crude futures CLc1 was
down 59 cents, or 1.2 percent, at $47.60 a barrel.
Both contracts broke 2016 highs several times earlier in the
week on the back of supply disruptions and output cuts across
the Americas, in Africa and also in Asia.
But the bull-run ended after the U.S. Energy Information
Administration (EIA) published data showing an unexpected 1.31
million barrel rise in U.S. crude stocks to 541.29 million
barrels C-STK-T-EIA .
"We suspect the oil market has moved too high, too far, too
soon," French bank BNP Paribas (PA:BNPP) said.
The inventory build came despite another fall in U.S. crude
oil production to 8.79 million barrels per day (bpd)
C-OUT-T-EIA , down from a peak of over 9.6 million bpd last
year.
BNP said that output falls, especially in the United States,
would likely result in "an upward drift in oil prices from the
end of 2016 through 2017."
Analysts said oil was also pushed lower by the minutes of
the Fed's April 26-27 policy meeting which showed the central
bank was likely to raise rates in June if economic data pointed
to stronger second-quarter growth, driving up the dollar.

Since oil is traded in dollar, a stronger greenback makes
fuel purchases for countries that use other currencies at home
more expensive, potentially denting demand.
After falling by almost 8 percent against a basket of other
leading currencies .DXY between January and April, the dollar
has since recovered 3.5 percent.
"There was a broad sell-off across commodities as the
U.S.-dollar rallied," said ANZ bank, and added that the stronger
dollar should keep downward pressure on commodity prices despite
the ongoing supply side issues."
Surging oil exports from Iran after international sanctions
against it were lifted in January also weighed on markets.
Iran's oil exports are set to jump in May, particularly to
Asia and Europe, to be up nearly 60 percent from a year ago to
2.1 million bpd. The rises suggests the country's logistical
problems following years of international sanctions have been
overcome or were less severe than thought. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC on Asia's Iranian crude oil imports http://graphics.thomsonreuters.com/iran-oil/index.html
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