The selling pressure started early this week as crude oil traders reacted to last Friday’s data from Baker Hughes that showed only one oil rig was removed from service the previous week. It marked the slowest pace traders have seen after 24 consecutive weeks of declines.
Since the market has been able to sustain prices over the $50 level since the first week of April and $55 since April 14, the slowdown in rig reductions is probably a sign that drillers are getting comfortable with the price action and may be considering ramping up production over the near-term.
Prices ran into additional headwinds as the U.S. dollar rally weighed on dollar-denominated crude oil futures. Concerns over Greece’s ability to make its debt payments to the International Monetary Fund and speculation that the Fed was likely to raise interest rates in September helped boost the Greenback. This pressured crude oil because it tends to reduce demand for commodities priced in dollars.
Finally, comments from Iran also helped put a lid on any rallies. Iran said OPEC was unlikely to change its production ceiling at its meeting on June 5. A combination of steady production from the oil cartel along with increased production by U.S. drillers should cap any upside action by crude oil futures over the near-term.
This week’s U.S. Energy Information Administration’s inventories report helped underpin the market a little, but not enough to recapture the losses…