Investing.com - Crude prices dipped in early Asia on Friday as investors locked-in overnight gains and looked ahead to rig count data from industry group Baker Hughes.
On the New York Mercantile Exchange, WTI crude for June delivery eased 0.35% to $45.88 a barrel.
Overnight, crude futures hit 2016 yearly-highs for the second consecutive session on Thursday, amid a broadly weaker dollar, as investors continued to digest signs of massive reductions in U.S. production, somewhat easing concerns related to the current global supply glut.
Energy traders continued to react to reports of a modest build in U.S. inventories from last week. On Wednesday, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that domestic crude inventories rose by 2.0 million barrels for the week ending on April 22.
At 540.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Meanwhile, the Energy Department said stockpiles at the Cushing Oil Hub in Oklahoma rose by 1.75 million barrels last week, remaining near full storage capacity. Cushing, the main delivery point for NYMEX oil, is the nation's largest storage facility.
At the same time, U.S. production fell sharply by 15,000 barrels per day to 8.938 million bpd, dropping to fresh 18-month lows. The recent declines in U.S. output add support to forecasts of deep reductions in output nationwide, as high-cost U.S. shale producers continue to be forced offline due to prohibitively low oil prices. Last week, the influential Paris-based International Energy Agency (IEA) predicted that Non-OPEC production could fall by as much as 700,000 bpd this year, its highest amount in a quarter century.
Investors also monitored developments in Venezuela, as protests regarding prolonged water, power and food shortages intensified throughout the country. Earlier this week, the Venezuelan government announced plans to schedule a two-day work week in an effort to preserve its national power grid. In March, Venezuelan production fell by 14,000 bpd to 2.515 million bpd. Venezuela is the sixth-largest producer in OPEC and the largest outside of the Middle East.
The dollar also fell sharply on Thursday, as currency traders reacted to a relatively dovish monetary policy statement from the Federal Reserve from the previous session. On Wednesday afternoon, the U.S. central bank held short-term interest rates steady for the third consecutive month, while providing hints that any future rate hikes will be gradual. The Bank of Japan also surprised many foreign exchange traders in the overnight, Asian session by maintaining its deposit rate at negative 0.1%. The BOJ was widely expected to approve further easing measures at the closely-watched meeting.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Despite the recent rebound, global oil prices are still down by more than 50% from their peak of $115 a barrel in June, 2014.