Oil prices fell about a dollar on Monday, unwinding steep gains last week that were spurred by mounting expectations of a second Opec supply cut and as colder weather began to eat into US fuel stocks.
US crude settled down 99 cents at $62.44 a barrel after dropping as low as $61.90. London's Brent crude was $1.17 lower at $63.45. "The run up that we had was too much, too soon," Olivier Jakob of Petromatrix said.
US crude hit a 17-month low of $54.86 on November 17, but then recovered. It climbed by around $4 last week and reached a peak of $63.82 early on Monday, the highest since September 28.
Most Opec ministers have said they still see the need for a further output cut when the Organisation of the Petroleum Exporting Countries meets in Abuja next week and that, regardless of price, the market is oversupplied. The group already agreed to reduce supplies by 1.2 million barrels per day from November 1.
A weak dollar, which on Monday was recovering from 20-month lows against the euro, has helped to drive buying across the commodities complex as dollar-denominated assets are relatively cheap. But it has also eroded the purchasing power of producer countries and could encourage them to seek a higher oil price.
"The dollar is not helping. It affects revenue. If there is a significant drop, it is of concern to us," United Arab Emirates' Oil Minister Mohammed al-Hamli told Reuters. Some analysts have said, however, Opec could be more worried about the forecasts of economic weakness in the United States, the world's biggest oil consumer, that have contributed to the dollar's slide.
A weaker US economy would impact oil demand and lower oil prices, although in the immediate term, tightening inventories could provide some support. US oil inventories are higher than a year ago, but a fall in heating fuel stocks last week helped to drive last week's price rally as colder weather began to bite.
Analysts polled by Reuters expected a US government report on Wednesday to show a 400,000-barrel decline in distillates stockpiles, which include heating oil, along with a modest increase in crude stocks.
After a cold spell this week, the US National Weather Service was forecasting above-normal temperatures next week, including in the US Northeast, the biggest heating oil consumer.
SYDNEY: Oil prices nudged higher on Monday, extending last week's rally of nearly 7 percent, after Saudi Arabia's oil minister said output should be cut because of high US fuel stocks and following the first big US winter snowstorm.
US crude was 12 cents higher at $63.55 a barrel and Brent crude settled on Friday 36 cents higher at $64.62.