The oil complex pushed sharply lower late in US trade Friday, extending an overnight selloff prompted by a stronger dollar, lower equities markets and OPEC's decision to roll over its 30 million b/d output target following Friday's meeting in Vienna.
NYMEX July crude settled $1.64 lower at $91.97/b, dropping $1.18 in the last half hour of the US trading day to bottom out at $91.83/b shortly before the 2:30 p.m. EDT (1830 GMT) NYMEX market settle.
"We're going to open the month of June with much lower prices," said Mike Guido, managing director of energy markets at Macquarie Bank. "The market was vested long on expectations of Cushing draws and refinery levels up towards 90%, and they have pretty much gotten the opposite of that. We're not getting the cleanup that this length was expecting."
Thursday's US inventory data from the US Energy Information Administration showed further builds in crude oil inventories at the Cushing, Oklahoma, storage hub, delivery point for the NYMEX crude contract, in addition to an unexpected slide in US refinery utilization.
ICE July Brent settled down $1.80 at $100.39/b after hitting a more-than-four-week low of $100.27/b in the late-day selloff.
Guido characterized the drop in oil prices as a "technical breakdown" and a "signal that length has started cashing out of the market."
While the decline accelerated late in US trade, the oil complex initiated the selloff overnight, with analysts pointing to a combination of a stronger dollar and weaker equities markets following mixed macroeconomic indications.
Eurostat released fresh figures on eurozone unemployment, showing a largely expected uptick in the official unemployment rate to 12.2% in April, a new record. The flash eurozone annual inflation estimate also rose in May to 1.4%, up from 1.2% in April but down from 2.4% in May 2012.
Equities markets were predominately lower in Asia and Europe overnight -- though Japan's Nikkei 225 recovered somewhat from the sharp selloff seen Thursday -- sentiment which largely carried over into the US trading day. The Dow Jones Industrial Average was down 0.22% at 15,290.4 at 2:30 p.m., while the Standard & Poor's 500 slid 0.35% to 1,648.64.
The US dollar also firmed overnight against a basket of global currencies, which was helping to contribute to the overall bearish pressure on oil prices, analysts said. At 2:30 p.m., the US Dollar Index was up 0.47% at 83.429.
OPEC's decision to roll over its 30 million b/d output target, while anticipated, was also seen to be acting as a bearish factor on market sentiment.
"Although not unexpected, the combination of the retention of the same target and recent increases in actual production to 30.5 million b/d that calls compliance into question suggest risk of an ongoing surplus even as seasonal demand for petroleum picks up in Q3," Citi Futures Perspective energy analyst Tim Evans said in a note.
"Spare capacity is really quite good right now," Schneider Electric Commodities analyst Jacob Correll said. "Even if stocks were to fall right now, there's plenty of additional capacity in the market."
Products also settled lower Friday, weighed down by the drop in crude prices. NYMEX June RBOB expired down 3.36 cents at $2.7789/gal, while NYMEX June heating oil expired 5.10 cents lower at $2.7921/gal. The July contracts closed trading down 5.24 cents at $2.7549/gal and down 6.28 cents at $2.7814/gal.
