Oil dropped below $65 a barrel on Thursday, declining for the first time in six days, after the U.S. Federal Reserve dampened hopes for a string of interest rate cuts and as rising U.S. output helped keep the market well supplied.
The Federal Reserve reduced rates on Wednesday, but against expectations the head of the U.S. central bank said the move might not be the start of a lengthy series of cuts to shore up the economy against global economic weakness.
Brent crude LCOc1, the international benchmark, fell 85 cents to $64.20 a barrel by 08.56 GMT, having dropped more than $1 earlier in the session.
U.S. West Texas Intermediate (WTI) CLc1 crude was down 89 cents at $57.69.
“A relatively upbeat mood in risky assets took a spectacular u-turn after last night’s Fed decision. The dollar started to strengthen and equities and oil went into a kind of meltdown mode,” Tamas Varga of oil broker PVM said.
A rising dollar makes oil more expensive for holders of other currencies and tends to weigh on commodities priced in the U.S. currency.
The dollar hit a two-year peak against the euro on Thursday after the Fed decision.
Oil’s drop came despite a bigger-than-expected decline in U.S. inventories and a fall in OPEC production in July, typically bullish drivers for prices.
But U.S. output rose in a market that analysts say is well supplied.
“Supply is plentiful and demand growth is showing signs of weakening globally because of trade conflicts, Brexit and other events that tend to potentially weaken economic growth and, hence, oil demand. There’s a lot of oil out there. U.S. output is growing strongly,” Victor Shum, Senior Partner at IHS in Singapore, said.
It would be recalled that OPEC and partners including Russia, an alliance known as OPEC+, have been curbing output this year to support the market.
In July, OPEC production revisited a 2011 low, helped by a further cut by Saudi Arabia, a Reuters’ survey showed.