Oil futures dropped nearly 4% Tuesday to mark their lowest settlement of the month, taking a hit from a stronger U.S. dollar as investors kept an eye on growing conflict in the Middle East and placed their bets ahead of weekly data on U.S. crude supplies.
June crude fell $2.17, or 3.65%, to settle at $57.26 a barrel on the New York Mercantile Exchange — the lowest settlement for a most-active contract since April 28. The Nymex June contract expired at the close of trading. July crudeCLN5, +0.67% lost $2.25, or 3.7%, to end at $57.99 a barrel.
“The surging dollar is having a broadly negative effect on the general commodities space … especially crude oil as the ‘long oil/short dollar trade’, which was a popular position among speculative money managers over the last few weeks, continues to come unwound,” said Tyler Richey, an analyst for the 7:00’s Report.
Commodities priced in dollars often trade inversely with the dollar, as moves in the U.S. unit can influence the attractiveness of those commodities to holders of other currencies.Looking ahead, the oil markets will get a weekly look at the U.S. inventory situation with the release of data from the American Petroleum Institute late Tuesday and the Energy Information Administration early Wednesday.
The EIA has reported supply declines for the past two weeks, but production edged up last week. If production shows an increase for the week ended May 15, “expect another bearish reaction from futures prices as production remains the focus for the energy markets,” said Richey.
Oil traders were also watching developments in the Middle East: Read: Islamic State solidifies foothold in Libya to expand reach
Iraq is the Organization of the Petroleum Exporting Countries’ second-largest oil producer with an output of around 3.4 million barrels of oil a day, second only to Saudi Arabia among OPEC members. The oil cartel’s next meeting is set for June 5.
June natural gas NGM15, +0.61% settled with a loss of 6.2 cents, or 2.1%, at $2.948 per million British thermal units.