U.S. crude stockpiles likely leaped for a second straight week last week, building by 1.3 million barrels, a Reuters poll showed. That came on top of Iraq’s pledge at the weekend to ship more crude after a ramp up of exports from its southern ports in August.
Fears of a renewed glut offset news that oil and gas operators in the U.S. Gulf of Mexico have shut production equal to 168,334 barrels per day of oil and 190 million cubic feet per day of natural gas as a precaution against a tropical storm. The closures represent 11.5 percent of oil output and 5.5 percent of gas production.
The dollar hit a three-week high against the yen after Federal Reserve Chair Janet Yellen bolstered expectations in a speech on Friday about a hike in interest rates soon. A stronger dollar makes commodities denominated in the greenback less affordable for holders of other currencies.
While few believe OPEC will cut output, some analysts are betting it will try to stem a selloff with more talk of a production freeze.
“While we see high probability of some 80 to 90 percent of a return to $39 WTI, we also feel that achievement of this objective could still be some four to five weeks away,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
Oil has rebounded this year but still trades at less than half of mid-2014 peaks above $100. Senior officials at Shell and ConocoPhillips (COP.N) said on Monday the oversupply could extend into 2017.