Oil futures settled lower Thursday, as recent data showing an unexpected climb in U.S. crude supplies and strength in the dollar following the Federal Reserve’s decision to hike interest rates combined to pull U.S. prices below $35 a barrel. Meanwhile, natural-gas futures tallied a seventh straight session loss after a report revealed that U.S. supplies of the heating fuel fell less than expected last week.
January WTI crude fell 57 cents, or 1.6%, to settle at $34.95 a barrel on the New York Mercantile Exchange. Prices logged their lowest settlement since February 2009. February Brent crude on London’s ICE Futures exchange also lost 33 cents, or 0.9%, to $37.06 a barrel.
Gasoline for January delivery RBF6, +0.40% tacked on 2.9 cents, or 2.3%, to $1.262 a gallon, rebounding from losses a day earlier, while January heating oil HOF6, +0.27% shed nearly a penny to $1.105 a gallon.
Oil’s decline was due to a combination of the U.S. dollar rally post-Fed and “WTI still feeling its way around $35 as it continues to test its 2008 low,” said Colin Cieszynski, chief market strategist at CMC Markets.
The ICE Dollar Index DXY, +0.48% was trading more than 1.4% higher when oil prices settled Thursday.
“We also appear to be getting some aftershocks” from Wednesday’s Energy Information Administration report, he said. The EIA said crude supplies climbed by 4.8 million barrels for the week ended Dec. 11. Analysts polled by Platts were looking for a 2.5 million-barrel decrease.
Also Wednesday, the Fed raised interest rates by a quarter of a percentage point. Higher U.S. interest rates usually strengthen the dollar, making dollar-denominated commodity prices, including crude oil, more expensive for foreign purchasers.
“The oil market is really being pressured by market fundamentals,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “U.S. oil production has not fallen for more than 2 months and inventories continue to rise.”