Oil prices settled lower on Thursday, giving back gains after the U.S. dollar reversed course on comments from President Donald Trump.
Light, sweet crude for March delivery lost 10 cents, or 0.2%, to $65.51 a barrel on the New York Mercantile Exchange, after trading at a fresh three-year high earlier in the session. Brent, the global benchmark, closed down 11 cents, or 0.2%, to $70.42 a barrel.
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The dollar jumped Thursday after President Trump said the greenback should get stronger with the U.S. economy. The WSJ Dollar Index recently traded up 0.1% at 83.37, after hitting the lowest level since 2014 earlier in the day.
"There's been much more heightened sensitivity around oil and the euro, and oil and the dollar over the last couple days," said John Saucer, vice president of research and analysis at Mobius Risk Group.
Previously, the U.S. currency had weakened on comments made Wednesday by U.S. Treasury Secretary Steven Mnuchin that "a weaker dollar is good for trade."
A weaker dollar helped support crude prices Thursday morning, as dollar-denominated commodities like oil became cheaper for other currency holders.
"Oil may have been a little bit overextended," Mr. Saucer said. "I do think the dollar's accelerated the process of pulling back."
Prices have rallied this year on signs of a tightening global market, as the Organization of the Petroleum Exporting Countries has worked to alleviate a world-wide glut. Further boosting investor optimism, U.S. inventories have fallen to the lowest level since February 2015.
On Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell by 1.1 million barrels in the week ended Jan. 19, marking the 10th consecutive week of declines.
Crude sitting in storage at delivery and pricing hub Cushing, Okla. has also fallen in recent weeks, lifting oil prices.
"There's no advantage to putting crude oil in storage, especially in Cushing right now," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. "That alone would be enough reason for a sizable rally right here."
Meanwhile, Saudi Arabia's oil minister and Russia's energy minister sounded unconcerned about rising output from U.S. shale, in remarks this week at the World Economic Forum in Davos, Switzerland.
OPEC, along with several producers outside the oil cartel, including Russia, agreed late last year to extend an accord to hold back crude output by 1.8 million barrels a day through the end of this year. The deal, first struck in late 2016, was meant to rein a global supply glut that has weighed on prices for over three years.
Saudi Arabia -- the de facto leader of OPEC -- indicated earlier in the week that the participants could continue to hold back production beyond this year.
But analysts are still worried about U.S. shale producers that are quick to increase output when oil prices rise. According to the EIA report, U.S. production rose by 128,000 barrels last week to 9.878 million barrels a day, a record.
Stockpiles of fuel also increased last week, with gasoline inventories up 3.1 million barrels and distillates up 600,000 barrels.
Gasoline futures fell 0.1% to $1.9154 a gallon and diesel futures advanced 0.4% to $2.1154 a gallon.
Christopher Alessi contributed to this article.
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(END) Dow Jones Newswires
January 25, 2018 16:29 ET (21:29 GMT)