Oil slips on supply glut, Fed decision

Oil prices initially rebounded on Tuesday, before hitting reverse as traders assessed the conditional agreement between Saudi Arabia and Russia and two other producers to limit output (AFP Photo/Jean-Philippe Ksiazek)

New York (AFP) - Oil prices fell Thursday to fresh multi-year lows on concerns about lofty US oil inventories and the drag from a strengthening dollar.

US benchmark West Texas Intermediate (WTI) for January delivery shed 57 cents at $34.95 a barrel on the New York Mercantile Exchange.

Brent North Sea crude for February delivery fell 33 cents to $37.06 a barrel in London.

The decline came after Wednesday's US Department of Energy inventory report showed a big rise in the nation's commercial crude stockpiles, as well as increases in gasoline and distillate fuel stocks.

Also Wednesday, the Federal Reserve announced the first increase to US benchmark interest rates in nine years, lifting the dollar versus other currencies. A stronger greenback dents demand for dollar-denominated oil in international markets.

Gene McGillian, broker and analyst at Tradition Energy, said oil prices will probably test the lows of 2008, which would bring WTI to the vicinity of $32 a barrel.

"Until we see signs that production is basically beginning to come down somewhere in the world... that the economic activity is going to pick up and boost fuel demand, the market is going to remain at these low levels and grind towards those areas we bottomed at during the Great Recession," McGillian said.

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