US oil slips to trade near $40 a barrel

Oil slipped from a three-month high to trade near $40 a barrel in New York, paring a fifth consecutive weekly gain.

Futures climbed earlier to the highest level since early December as US oil production dropped, while central bank policies put pressure on the dollar and improved the outlook for demand growth.

“The oil market is getting ahead of what the fundamentals justify,” said Michael Lynch, president of Strategic Energy & Economic Research in Massachusetts.

West Texas Intermediate for April delivery, which will expire Monday, slipped 19 cents to $40.01 a barrel at one stage in New York, after touching $41.20 earlier.

Europe’s benchmark contract, Brent for May settlement, increased 17 cents to $41.71 a barrel in London.

Brent was at one stage up as much as 65 cents, or 1.5%, at $42.19 a barrel after setting a 2016 high at $42.54.

It was on track for a gain on the week, its fourth straight weekly rise.

The dollar, on the slide since a more accommodative US monetary policy unveiled this week, traded near five-month lows, making many commodities, including oil, more attractive to users of currencies such as the euro.

“Focus for now is firmly placed on a global macroeconomic environment that is propelling other industrial commodities such as the metals as well as world equities back to around highest levels since late last year,” said Jim Ritterbusch of Chicago-based energy markets consultancy Ritterbusch and Associates.

Oil has surged about 55% from 12-year lows after the Organisation of the Petroleum Exporting Countries floated the idea of a production freeze two months ago, boosting Brent from about $27 and US crude from around $26.

Opec kingpin Saudi Arabia and non-Opec producers led by Russia will meet in Qatar on April 17 to further the initiative that could result in the first global oil supply deal in 15 years.

US crude inventories hit a fifth straight week of record highs last week but the build of 1.3 million barrels was less than half of forecasts. Gasoline demand, meanwhile, jumped 6.4% over the past four weeks from a year ago.

“We are leaving the period of low demand and starting to move toward the period when demand increases over the summer,” said Olivier Jakob, oil market analyst at Petromatrix at Zug in Switzerland.