Oil falls to two-week low as gasoline supply rises, dollar gains

NEW YORK (Bloomberg) -- Oil dropped to a two-week low after a report showed U.S. gasoline supplies gained for the first time in nine weeks as crude output rose.

Gasoline stockpiles climbed 1.54 million bbl last week, surprising analysts surveyed by Bloomberg who projected the Energy Information Administration data would show a 2-million-bbl decrease. Crude inventories fell 1.03 million bbl to 532.3 million last week, the agency reported Wednesday. Crude production rose to the highest since August 2015. Price drops accelerated as the dollar strengthened against its peers, curbing the appeal of commodities.

Oil had rallied above $53/bbl after some members of the Organization of Petroleum Exporting Countries voiced support for prolonging cuts past June, but rising U.S. output is undermining the effort to trim a global glut. Production from major shale plays in May is forecast to climb to the highest level since 2015, according to the EIA.

"The glaring rise in U.S. gasoline refined product inventories, in combination with persistent lower-48 production growth, keeps us cautious on oil prices," said Chris Kettenmann, chief energy strategist at Macro Risk Advisors LLC in New York. "We would not buy the intraday dip."

West Texas Intermediate for May delivery dropped 73 cents, or 1.4%, to $51.68/bbl at 12:33 p.m. on the New York Mercantile Exchange. Futures touched $51.43, the lowest since April 6. Total volume traded was about 9% above the 100-day average.

Brent for June settlement fell 83 cents, or 1.5%, to $54.06/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.97 premium to June WTI.

Crude production advanced 17,000 bpd to 9.25 million in the week ended April 14, the highest since August 2015. Output in the lower-48 states rose 21,000 bpd to 8.72 million, also the highest since August 2015.

Refineries processed 16.9 MMbopd, up 241,000 bbl from the prior week and the highest since the record 17.1 million was touched in January. American refiners typically boost operating rates at this time of year as they prepare for the summer surge in gasoline demand.

"We should see an accelerating level of crude draws, something we’ve been waiting for a while," Cavan Yie, senior equity analyst at Manulife Asset Management Ltd. in Toronto, said by telephone. "The reasons are twofold. Refinery maintenance is finishing, which is leading to greater processing of crude, and the OPEC cuts are going to finally have an impact on U.S. inventories."

Oil-market news. Oil-exporting countries are moving closer toward ending a global glut and re-balancing the market, and OPEC will decide in May whether to extend production cuts, the group’s Secretary-General Mohammad Barkindo said. Iran will probably be allowed to keep its oil production unchanged if OPEC decides to extend its six-month agreement on output cuts beyond June, Kuwaiti Oil Minister Issam Almarzooq said