Oil Slips Near $66 as 4-Day Rally Fizzles With Dollar Strength

(Bloomberg) -- Oil slipped near $66 a barrel -- halting a four-day rally -- amid dollar strength and concern the market will be flooded with Iranian barrels if sanctions on the Persian Gulf producer are lifted.

Futures edged lower as a rising U.S. currency made commodities priced in the dollar less attractive to investors after oil advanced almost 7% over the past four sessions amid demand optimism. American crude and gasoline stockpiles fell last week, more evidence the consumption recovery is gathering pace.

Strong U.S. demand along with a rebound in China and parts of Europe is partially assuaging concern about a return of Iranian barrels if a nuclear deal is revived. It’s also outweighing a slide in consumption in some regions of virus-hit Asia, most notably India, where the oil industry is struggling to predict when demand will recover.

“The market is still unsure how the Iran issue will play out,” said Daniel Hynes, senior commodities strategist at Australia and New Zealand Banking Group Ltd. “The outlook remains positive, with easing restrictions likely to boost travel. However, the exact timing of any additional Iranian oil could make a big difference to the oil market.”

U.S. distillate stockpiles -- a category that includes diesel -- dropped last week to the lowest since April 2020, according to the Energy Information Administration. A rolling four-week average of gasoline supplied, meanwhile, topped 9 million barrels a day for the first time since March last year.

The Memorial Day weekend at the end of May usually heralds the start of the summer driving season. However, gasoline stockpiles are low and are setting the stage for a supply squeeze typically only seen when a hurricane knocks out refineries, according to one fuel distributor.

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