Oil prices slumped Tuesday in the latest sign that the recent rally in crude prices may have peaked.
The U.S. oil benchmark has slid for five straight sessions, the longest losing streak since mid-March. Though prices are still up more than 30% from a near six-year low reached in March, the benchmark has fallen 5.7% in the last five sessions.
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Light, sweet crude for June delivery settled down $2.17, or 3.7%, to $57.26 a barrel on the New York Mercantile Exchange. The June contract expired at settlement Tuesday. The more actively traded July contract settled down $2.25, or 3.7%, at $57.99 a barrel.
Brent crude, the global benchmark, settled down $2.25, or 3.4%, at $64.02 a barrel on the ICE Futures Europe exchange.
"Today's hard selloff...should prove to be the beginning of a major price decline," said energy-advisory firm Ritterbusch & Associates in a note.
A stronger dollar has been a key driver of the oil market in recent days, analysts said. Oil is traded in dollars and becomes more expensive for buyers holding other currencies when the greenback strengthens. The Wall Street Journal Dollar Index, which tracks the dollar against a basket of other major currencies, recently rose 0.9%.
Additionally, market participants have warned that the global crude market is still too oversupplied to sustain U.S. prices above about $60 a barrel.
U.S. production has held largely flat this year despite large spending cuts and a pullback in drilling. If prices hold above $60 a barrel, analysts and traders say, shale-oil producers will be able to maintain their current production levels or even increase output, adding to the global glut of crude.
"Every time we get closer to, or just above, $60, we sort of revert pretty quickly," said John Saucer, analyst at Mobius Risk Group. "There's a reasonable amount of companies that can make pretty good internal rates of return with...prices in the low to mid-60s."
The rally in oil prices in recent weeks, spurred by rising demand, investor appetite for crude and geopolitical concerns, caught many market watchers off-guard.
Citigroup Inc., which has been one of the most bearish voices in the oil market, on Tuesday raised its average price forecasts for 2015 to $63 a barrel for Brent and $56 a barrel for the U.S. benchmark. However, the bank's analysts maintained that the recent factors that drove prices higher were unlikely to last.
"Oil prices have risen too fast too quickly," the bank said. "We think crude prices will likely need to trade lower at some point in 2015."
Market participants are waiting for weekly U.S. inventory data to be released from the U.S. Energy Information Administration on Wednesday. Analysts surveyed by The Wall Street Journal expect the agency to report that crude inventories fell by 1.1 million barrels in the week ended May 15, while gasoline stockpiles rose by 300,000 barrels and supplies of distillates, including heating oil and diesel fuel, rose by 100,000 barrels.
The American Petroleum Institute, an industry group, is scheduled to release its inventory data for the same period later Tuesday.
Gasoline futures settled down 4.61 cents, or 2.3%, to $1.9950 a gallon. Diesel futures fell 5.76 cents, or 2.9%, to $1.9292 a gallon.
(By Nicole Friedman)