Light, sweet crude for June delivery settled 35 cents or 0.4% lower at $96.04 a barrel on the New York Mercantile Exchange. Futures traded as low as $93.37 a barrel early in the session, but pared more than $1 of the early losses in the last half-hour of trading.
Brent crude on the ICE futures exchange fell 75 cents to trade $103.72 a barrel.
Futures were stung by gains in the dollar against its largest trading partners, which also weighed on broader commodities markets. The Dow Jones-UBS Commodity Index was recently down 1.1%.
Additionally, a report from the Organization of the Petroleum Exporting Countries suggested global oil demand remains weak.
“It was a whipsaw session,” said Peter Donovan, a broker at Vantage Trading, who said that worries about China’s growth and economic weakness in the euro zone have kept some investors on edge. “Some of the bulls are on the defensive.”
In its monthly outlook, OPEC kept its 2013 oil-demand outlook unchanged from last month, when it predicted demand would increase by 800,000 barrels a day compared to last year. But the group said demand growth was weaker than expected in the first quarter, and warned that slowing growth in China and economic weakness in the euro zone are threatening to further slow the global economy.
“The OPEC report today is not encouraging for demand in the second half of this year,” said Andy Lebow, an oil broker at Jefferies Bache in New York. “We need a significant increase in demand to get oil above the top of this trading range.”
After rallying to end 2012, U.S. oil prices have been stuck below $98 a barrel since the beginning of the year, and fell as low as $86 in April.
Analysts and traders say that without an improvement in the broader economy, fuel usage will remain sluggish. And increasing production, particularly in the U.S., is leading to rising stockpiles.
U.S. oil inventories rose to 395.5 million barrels last week, the highest level in over thirty years. Additionally, output is increasing in Saudi Arabia, the world’s largest oil exporter.
U.K.-based tanker tracker Oil Movements said Thursday that seaborne oil shipments from OPEC members will rise by 290,000 barrels a day in the four weeks to May 25, compared with the previous four-week period.
“This physical oversupply prevents prices from gaining at the moment,” said Carsten Fritsch, commodity analyst at Commerzbank.
Front-month June reformulated gasoline blendstock, or RBOB, settled 2.48 cents, or 0.9%, lower at $2.8603 a gallon. June heating oil settled 1% lower at $2.9062 a gallon.
*John DiColo, Rigzone