Oil nears 11-year low on oversupply, strong dollar

Adding to the commodity’s woes is the US Federal Reserve’s decision on Wednesday to raise benchmark interest rates for the first time in nine years, boosting the dollar and thus making crude more expensive for buyers with weaker currencies.

If it falls below $36.20, it will hit the lowest since July 2004.

Market intelligence company Genscape reported an inventory increase of 1.4 million barrels at the Cushing, Oklahoma delivery hub for WTI futures, traders who saw the data said on Thursday. Market analysts’ expected a crude-stock drop of 1.4 million barrels.

Crude prices sank deeper in Asian trading on Friday after the U.S. oil benchmark closed at its lowest level since February 2009 on worsening oversupply concerns and a stronger dollar.

“The price action is likely to remain violent, but the odds are on lower numbers”, said PVM Oil Associates technical analyst Robin Bieber.

USA crude’s West Texas Intermediate (WTI) futures were down 9 cents at $34.86 a barrel by 0558 GMT (12.58 a.m. ET).

Crude oil futures settled below USD35 a barrel for the first time in six years Thursday, extending brutal recent losses amid rising USA inventories.

“We still see high risks that prices may decline further, as storage continues to fill”, Damien Courvalin, an analyst in NY, said in the report. The Organization of Petroleum Exporting Countries earlier this month effectively abandoned production limits to defend market share, while the White House on Wednesday announced its support for a deal reached by congressional leaders that would end the nation’s 40-year restrictions on crude exports.

The dollar added nearly 1 percent to 98.778 against a basket of major currencies and looked set for another test of stiff resistance around the 100.00 mark.

Russian Federation has long maintained informal contacts with OPEC and hinted in the past it might be ready to cut oil production to prop up prices.