The price of oil extended a week-long plunge Friday, falling 1.6 per cent to below US$94 a barrel as a rebounding U.S. economy drove the dollar higher and signs continue to emerge that there is an ample supply of crude worldwide.
Benchmark West Texas Intermediate crude for February delivery fell $1.48 to close at US$93.96 a barrel in New York. Brent crude, used to price international crude processed by many U.S. refineries, fell 89 cents to close at US$106.89 a barrel in London.
U.S. crude fell by $2.98 on Thursday, the biggest one-day drop since November of 2012. Prices have fallen 6.4 per cent over the past week, after oil closed above $100 last Friday for first time since October.
A financial recovery in the U.S. would typically drive oil prices higher, given the appetite of the world's largest economy. But that recovery has been driven in part by a massive bond-buying program at the Federal Reserve that has encouraged investors to buy commodities, which had pushed prices higher.
The Fed recently began winding that program down, however. That is helping to boost the value of the dollar and leading investors away from oil.
A stronger greeback makes commodities such as oil that are priced in dollars more expensive for buyers using other currencies.
Meanwhile, although demand is rising in the U.S., supplies appear to be sufficient. The U.S. Energy Department reported Friday that average petroleum demand over the past four weeks rose 3.3 per cent compared with last year. While oil stocks fell by seven million barrels, that is "above the upper limit of the average range for this time of year," according to the weekly status report.
U.S. oil production is rising dramatically and there is a chance that additional sources of crude may soon become available.
Protests at one of Libya's largest oil fields reportedly ended Thursday, which could allow the field to restart production and deliver more than 300,000 barrels of daily production to the global market. Libya remains unstable, however, and on Sunday a militia group that shut down most of the nation's oil terminals for months threatened to cut off natural gas deliveries to the capital.
"While recent announcements of a similar nature have failed to materialize and the situation in the east of the country remains in a deadlock, the potential of additional sweet crude supplies are serving to weigh further," JBC Energy said from Vienna.
In other energy futures trading, wholesale gasoline fell 4.6 cents to close at US$2.649 a U.S. gallon (3.79 litres), heating oil fell 4.8 cents to US$2.939 a gallon and natural gas fell 1.4 cents to US$4.282 per 1,000 cubic feet.
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