Oil Prices Drop Ahead of Holiday Weekend

OilReuters

Oil fell more than 1 percent on Friday as a rallying dollar and profit-taking ahead of a long U.S. holiday weekend cut short a two-day run-up in crude prices.

Heating oil, a proxy play for diesel, and gasoline slipped more than 1 percent too on concerns of outsized U.S. supply despite forecasts for a spike in driving this weekend and through Monday's Memorial Day holiday.

Continue Reading Below

Worries that fewer U.S. oil rigs were being idled after a broad rebound in crude prices since early April further weighed on sentiment.

U.S. crude was down 95 cents at $59.77 a barrel by 11:45 a.m. EDT (1545 GMT). But for the week, it was expected to rise slightly, gaining for a 10th straight week.

North Sea Brent oil, a more widely referenced benchmark, fell $1.10 to $65.44. Brent was headed for a 2 percent drop on the week.

The dollar rose to a two-week high ahead of the holiday weekend after a U.S. inflation report indicated underlying price pressures that could prompt an interest rate hike later in the year.

A stronger greenback makes dollar-denominated commodities less affordable to holders of the euro and other currencies. Traders said oil was particularly vulnerable to profit-taking after the gains of the past two days where Brent had risen 4 percent and U.S. crude 6 percent.

"No one wants to hold open positions ahead of a long weekend so books are being squared, bringing some consolidation," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

The American Automobile Association said U.S. road travel was expected to reach a 10-year high over Memorial Day, suggesting strong fuel consumption over the next three days.

But analysts said gasoline supplies may be too high to see any bullish impact from such usage.

"The refineries have cranked out more gasoline and fuel products than required in the near term and that's weighing on the petroleum complex," said Andrew Lipow, president of Lipow Oil Associates in Houston.

Oil services firm Baker Hughes is scheduled to release at 1:00 p.m. (1700 GMT) its weekly count of rigs drilling for oil in the United States.

The count is expected to have risen this week, the first time since December, in the strongest sign yet that the recent price rebound has coaxed producers back to the well pad after a nearly six-month slump in activity. (Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Ahmed Aboulenein, William Hardy and Meredith Mazzilli)