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UPDATE 7-Oil drops on dollar strength and OPEC+ supply expectations

Published 26/02/2021, 06:37
Updated 27/02/2021, 00:06
© Reuters.

© Reuters.

* Dollar up as U.S. bond yields hold near one-year highs
* Market expects increased oil supply
* OPEC+ producers meet on March 4
* Brent and WTI on track for 20% monthly gain

(Updates with CFTC data)
By Jessica Resnick-Ault
NEW YORK, Feb 26 (Reuters) - Oil prices fell on Friday as
the U.S. dollar rose .DXY while forecasts called for crude
supply to rise in response to prices climbing above pre-pandemic
levels.
U.S. West Texas Intermediate (WTI) crude CLc1 futures
settled $2.03, or 3.2%, lower at $61.50 per barrel.
Brent crude LCOc1 futures for April, which expired on
Friday, fell 75 cents in the session, or 1.1%, to settle at
$66.13 a barrel. The more actively traded May contract LCOc2
slipped by $1.69 to $64.42.
The dollar rose as U.S. government bond yields held near
one-year highs, making greenback-priced oil more expensive for
holders of other currencies. FRX/
However, Brent rose 4.8% and WTI ended up 3.8% on the week,
and both were about 20% higher in the month on supply
disruptions in the United States and optimism over demand
recovery on the back of COVID-19 vaccination programmes.
"It's a dicey time - it doesn't seem like a time to load up
on a risk-asset position," said Bob Yawger, director of Energy
Futures at Mizuho in New York, wary of a potential output
increase from OPEC and allies at next week's meeting.
Also, the U.S. stockpile report this week showed a surprise
build in oil inventories. EIA/S
Investors are betting that next week's meeting of the
Organization of the Petroleum Exporting Countries (OPEC) and
allies, a group known as OPEC+, will result in more supply
returning to the market.
U.S. crude production fell in December, the latest month for
which data is available, according to a monthly report from the
Energy Information Administration EIA/PSM
Despite talk of tightening fundamentals, the demand side of
the market is nowhere near warranting current oil price levels,
some analysts said.
U.S. crude prices also face pressure from slower refinery
demand after several Gulf Coast facilities were shuttered during
the winter storm last week. Refining capacity of about 4 million barrels per day (bpd)
remains shut and it could take until March 5 for all capacity to
resume, though there is risk of delays, analysts at J.P. Morgan
said in a note this week.
Hedge funds and other money managers raised their net long
U.S. crude futures and options positions in the latest week to
Feb. 23, the U.S. Commodity Futures Trading Commission (CFTC)
said. CFTC/

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