Oil fell on Tuesday as a firmer dollar encouraged investors to take profits from a two-week rally ahead of weekly data that analysts have forecast will show a build in US crude inventories. By 1:12 pm Eastern time (1812 GMT), Brent was down 67 cents to $66.83 a barrel, while US West Texas Intermediate crude fell 72 cents to $63.18. In earlier trading, both benchmarks had been down more than a dollar.
"We got a little extended on the upside - we had a price advance of more than $6 a barrel in crude in less than two weeks," said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates. "And now I think we have some money managers taking profits ahead of the API and EIA data." Analysts polled by Reuters expect data to show US crude inventories rose 2.7 million barrels last week. Industry group the American Petroleum Institute releases its weekly figures on Tuesday at 4:30 pm EST. The United States Energy Information Administration (EIA) releases official data Wednesday morning.
US crude inventories have fallen more than 100 million barrels in 12 months, to their lowest in three years. Seasonally, stocks tend to build in the first quarter. The EIA will also release its monthly report on crude supply, which analysts expect to include substantial upward revisions to US oil output.
Soaring US production has pressured oil futures at a time when Opec members and Russia have reduced their output in an attempt to support prices. The United States will overtake Russia as the world's biggest oil producer by 2019, International Energy Agency (IEA) Executive Director Fatih Birol said on Tuesday.
"US shale growth is very strong... The United States will become the No.1 oil producer sometime very soon," he said. US output was 10.27 million barrels per day (bpd), according to government data released on Thursday, higher than the latest figures for the world's largest exporter Saudi Arabia and just below Russia.
"It is likely that the ... monthly data will show US crude oil production in December about 200,000-300,000 bpd above what was estimated in the weekly reports," Petromatrix analyst Olivier Jakob said in a note. The dollar rose after Federal Reserve Chairman Jerome Powell said the central bank would stick with gradual interest rate increases. A strong dollar makes oil more expensive for buyers using other currencies.
Powell's comments pressured Wall Street stocks. "Were getting a little softening in the stock markets in response to some of the Fed comments," said Ritterbusch. "That's enough to take us down a notch. We'll see tomorrow what the EIA data says."