Crude futures pulled back from 2016 highs on Thursday as traders locked in profits after April’s sharp rally.
International Brent crude futures were trading at $46.91 per barrel at 0638 GMT, down 27 cents from their last settlement. U.S. West Texas Intermediate (WTI) futures were down 20 cents at $45.13 a barrel.
The dips came after both benchmarks rose on Wednesday to their highest levels for 2016 in what has been one of the steepest price increases in recent years. Both Brent and WTI have rallied more than 70 percent since their respective 2016 lows in January and February.
Record crude storage figures may have spurred some investors to take profits on Thursday by closing long positions, traders said, and government data on Wednesday showed that U.S. crude stocks climbed 2 million barrels last week to an all-time peak of 540.6 million barrels.
But despite the price falls, analysts say that further bullish momentum could emerge due to the on-going weakness in the dollar which is down almost 6 percent this year against other leading currencies.
Therefore, a weaker greenback makes dollar-traded crude cheaper to buy for countries using other currencies at home.
A release by the U.S. Energy Information Administration (EIA) showed that crude oil production fell to 8.94 million barrels per day (bpd) last week, down almost half a million bpd from this time last year.
The Federal Reserve said Wednesday that it would leave U.S. interest rates unchanged, while the bank of Japan said it would hold back from expanding stimulus.
Analyst warns that global spare capacity, estimated around 2 million bpd, or 2 percent of demand, was “precariously low” given the frequency of unexpected disruptions recently, including pipeline interruptions and strikes, as well as “the dire fiscal situation of producers like Venezuela, Iraq and Nigeria.