Oil prices fall to 4-week low with dollar, U.S. supply data in focus

Investing.com - Crude oil futures fell to a one-month low on Wednesday, as traders continued to monitor the direction of the dollar while looking ahead to weekly data on U.S. stockpiles of crude and refined products later in the day.

On the New York Mercantile Exchange, crude oil for July delivery hit an intraday low of $57.45 a barrel, the weakest level since April 29, before trading at $57.83 during U.S. morning hours, down 20 cents, or 0.36%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.05% at 97.44. The index traded in a wide range between 97.01 and 97.87, the most since April 23.

Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.

Demand for the greenback remained supported by the view that the Federal Reserve could start to raise interest rates later in the year if the economy continues to improve as expected.

Meanwhile, the American Petroleum Institute will release its inventories report later in the day, while Thursday’s government report could show crude stockpiles fell by 2.0 million barrels in the week ended May 22.

The reports come out one day later than usual due to the Memorial Day holiday in the U.S. on Monday.

Indications that the sharp decline in U.S. drilling activity in recent months may be nearing an end also weighed. According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. fell by only one last week to 659.

Oil traders have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

However, the rate of decline has slowed in recent weeks, fuelling concerns that some shale oil companies will dial up their output in the months ahead if prices stabilize near current levels.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for July delivery slumped 88 cents, or 1.37%, to trade at $62.85 a barrel after touching a session low of $62.68, a level not seen since April 23.

The Organization of Petroleum Exporting Counties is expected to keep production levels unchanged when it meets on June 5, despite ongoing concerns over ample global supplies.