Oil prices rose on Monday as investors weighed a decline in the U.S. dollar against growing crude production by Saudi Arabia.
Light, sweet oil for May delivery settled up 88 cents, or 1.9%, at $47.45 a barrel on the New York Mercantile Exchange, the highest settlement since March 11.
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Brent, the global benchmark, rose 60 cents, or 1.1%, to $55.92 a barrel on ICE Futures Europe, the highest level since March 12.
Currency markets have been especially volatile in recent sessions as investors have assessed the likelihood of higher U.S. interest rates later in the year. The WSJ Dollar Index, which measures the dollar against a basket of currencies, recently fell 0.7%. Oil is traded in dollars, so a drop in the dollar's value makes oil less expensive to buyers using foreign currencies.
The correlation between the dollar and oil prices has risen in recent months. Industry newsletter The Schork Report attributed 87% of the move in U.S. oil prices since Thanksgiving to the move in the dollar, in a note released Monday. "At this point, the U.S. Federal Reserve...will have as much of a role in determining the path of crude oil as will Tehran and Riyadh," according to the report.
Brent prices slid below $55 a barrel in overnight trading after Saudi Arabia's influential oil minister Ali al-Naimi told a conference in Riyadh on Sunday that the country is currently producing around 10 million barrels of crude a day. At that rate, the kingdom is producing the most crude oil since July, when oil prices started collapsing. Saudi Arabia's output was 9.7 million barrels a day in February, according to OPEC data.
Mr. Naimi also said there was no conspiracy behind the Organization of the Petroleum Exporting Countries' decision last fall to maintain its output target. He said the group could have lost market share if it had cut its production.
Oil prices lost half their value in 2014, largely due to OPEC's decision not to cut output in the face of a global glut of crude. The market remains oversupplied and is likely to see a larger surplus in the second quarter, according to Barclays.
Investors remain split on whether oil prices are at or near a bottom.
Money managers, including hedge funds, held the largest number of bets on record that U.S. oil prices would fall as of March 17, according to Commodity Futures Trading Commission data starting in June 2006. On an aggregate basis, money managers are still betting that Nymex crude prices will rise, but their net bet on higher prices is the smallest since December 2012.
In the Brent market, the aggregate managed-money bet on rising prices as of March 17 was the smallest in three weeks, according to Intercontinental Exchange Inc.
Traders are closely watching negotiations over Iran's nuclear program. U.S. and Iranian diplomats are hoping to seal a tentative political agreement before an end-of-March deadline. This could pave the way for increased Iranian oil exports.
While Iran is unlikely to add significant volumes of crude before year-end, about 500,000 to 700,000 barrels a day of new exports could flood the market by 2016, delaying a price recovery, said Morgan Stanley in a note.
Investors have also been looking at the number of oil drilling rigs in the U.S. for an indication of eventual supply cuts. The number of oil rigs fell by 41 last week to 825, oil-field-services firm Baker Hughes Inc. reported on Friday. The rig count has fallen by more than 40% since the start of the year.
"The current rig count is pointing to U.S. production declining slightly sequentially" in the second and third quarter of the year, said Goldman Sachs in a note. U.S. output is currently running at a multiyear high of about 9.4 million barrels a day.
Gasoline futures settled up 0.61 cent, or 0.3%, at $1.8039 a gallon. Diesel futures fell 0.36 cent, or 0.2%, to $1.7307 a gallon.