Oil prices extended their retreat in Asia today after hawkish US Federal Reserve meeting minutes strengthened the dollar and a weekly report showed a rise in US crude stockpiles.
Prices hit fresh 2016 highs on Wednesday due in part to production outages resulting from persistent wildfires around the Canadian oil sands hub of Fort McMurray but pulled back to settle lower after the dollar climbed.
A stronger greenback makes dollar-priced oil more expensive, denting demand and hurting prices.
Minutes from the US Federal Reserve's policy meeting in April and released Wednesday showed that policymakers kept open the door to raising interest rates in June.
Higher interest rates typically encourages investors to move to the dollar for higher yields, lifting the currency.
At about 0900 IST, US benchmark West Texas Intermediate (WTI) for June delivery fell 72 cents, or 1.49 per cent, to USD 47.47 a barrel. Brent for July dipped 84 cents, or 1.72 percent, to USD 48.09.
Before Fed minutes were released, prices had been on the march toward USD 50 due to supply disruptions in Canada and Africa's biggest oil producer Nigeria, with better demand also boosting hopes of easing a global crude oversupply.
CMC Markets senior sales trader Alex Wijaya said the strengthening dollar and a rise in US commercial crude inventories last week combined to "cause a dip in oil prices".
The US stockpiles rose 1.3 million barrels in the week ending May 13, indicating softer demand in the world's top oil consumer.
Prices have rebounded strongly since plunging to near 13-year lows below USD 30 in February but are still well below peaks of more than USD 100 a barrel reached in June 2014.
"In the near term, the oil market will watch closely economy data from Japan and US due to be released next week," said EY oil and gas analyst Sanjeev Gupta.
"Outages and supply disruptions in Canada, Nigeria and Venezuela will also impact the balancing of the oil market," he said in a note.
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