By Henning Gloystein
SINGAPORE (Reuters) – Oil prices fell by around one percent on Friday as a stronger dollar weighed and Russia warned that a global crude supply overhang could last into next year.
The dollar has recovered 2.46 percent in value from May lows against a basket of other leading currencies <.DXY>, reversing an almost 8-percent fall earlier in the year.
A stronger dollar, in which oil is traded, makes fuel imports more expensive for countries using other currencies, potentially hitting demand.
International Brent crude futures <LCOc1> were trading at $47.66 per barrel at 0650 GMT, down 42 cents or 0.9 percent from their last settlement.
U.S. West Texas Intermediate <WTI> crude futures <CLc1> were down 54 cents, or 1.18 percent, at $46.16 a barrel.
But analysts said that declining output, especially in North America was preventing deeper price falls.
“A stronger U.S.-dollar came up against more positive fundamentals … due a fall in U.S. oil production,” ANZ bank said on Friday.
U.S. crude oil production <C-OUT-T-EIA> has fallen 4.7 percent from 2016 peaks in January to 8.8 million barrels per day (bpd), according to U.S. Energy Information data, and output is down 8.4 percent from its 2015 peak.
In Canada, crude production outages from oil sand fields following forced closures due to wildfires still stood over 1 million bpd as of Wednesday, although operators said they were gradually ramping up output.
“Wildfires may have temporarily shut in as much as 1.4 million bpd of production, but there appears to be no facility damage. Operations are beginning to restart, but we believe (assuming no pipeline damages) it will take weeks to ramp production,” U.S. investment bank Jefferies said.
With global demand rising by 1.4 million bpd in the first quarter of 2016, compared with the same time last year, consumption remained strong, also supporting markets.
Yet top crude oil producer Russia poured cold water on the notion that recent falls in production in the Americas, Asia and Africa had wiped out a global production and storage overhang that helped pull down oil prices by over 70 percent between 2014 and early 2016.
Russian Energy Minister Alexander Novak told reporters on Thursday that the global oil surplus stood at 1.5 million bpd and that the market might not balance out until the first half of 2017.
“(The outlook that the market won’t balance until the first half of 2017) is an optimistic forecast as oversupply persists and the decline in production volumes is slower than analysts expected,” he said.
Novak said he expected Russia to produce 540 million tonnes (10.81 million bpd) or more of oil this year, up from 534 million tonnes in 2015.
(Reporting by Henning Gloystein; Editing by Anupama Dwivedi)