Oil Down 2% Ahead Of Long US Memorial Day Weekend
NEW YORK, May 22 (Reuters) - Oil fell about 2 percent on Friday as a rallying dollar and profit-taking ahead of a long U.S. holiday weekend cut short a two-day run-up in crude prices.
Heating oil, a proxy play for diesel, also fell almost lost 2 percent while gasoline lost more than 1 percent on concerns of outsized U.S. supply despite forecasts for a spike in driving this weekend and through Monday's Memorial Day holiday.
Worries that fewer U.S. oil rigs were being idled after a broad rebound in crude prices since early April further weighed on sentiment. Drillers cut the number of U.S. oil rigs in operation by just one this week, the strongest sign yet that a nearly six-month slump in activity was ending, data from oil services firm Baker Hughes showed.
U.S. crude settled down $1, or 1.7 percent, at $59.72. It rose 3 cents for the week though, extending weekly gains for a 10th straight week.
North Sea Brent oil, a more widely referenced benchmark, settled down $1.17, or 1.8 percent, at $65.37 a barrel. Brent fell 2.1 percent on the week.
The dollar traded at a near one-month high after Federal Reserve Chair Janet Yellen said she expected the central bank to raise rates this year as the U.S. economy was on course to rebound from a sluggish first quarter and as headwinds at home and abroad begin to wane. A U.S. inflation report also indicated underlying price pressures that could prompt a rate hike.
A stronger greenback makes dollar-denominated commodities less affordable to holders of the euro and other currencies. Traders said oil was particularly vulnerable to profit-taking after the gains of the past two days in which Brent had risen 4 percent and U.S. crude 6 percent.
"No one wants to hold open positions ahead of a long weekend so books are being squared, bringing some consolidation," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.
The American Automobile Association said U.S. road travel was expected to reach a 10-year high over the Memorial Day weekend, suggesting strong fuel consumption over the next three days.
But analysts said gasoline supplies may be too high to see any bullish impact from such usage.
"The refineries have cranked out more gasoline and fuel products than required in the near term, and that's weighing on the petroleum complex," said Andrew Lipow, president of Lipow Oil Associates in Houston.
(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Meredith Mazzilli and Jonathan Oatis)
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