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July 22, 2016 4:25 PM, EDT

Oil Drops to Two-Month Low Amid Ample US Supply, Rising Dollar

Jamie Schwaberow/Bloomberg News

Oil dropped to the lowest close in more than two months as the United States heads to the end of the summer-driving season with ample inventories.

Futures fell 1.3% in New York. U.S. crude and gasoline supplies are at the highest seasonal levels in at least two decades, government data show. Record June demand of the fuel wasn’t enough to make a dent in stockpiles that ended the month at the highest level since 1984 for this time of year, the American Petroleum Institute said. The summer driving season ends Sept. 5 on Labor Day. Oil also slipped as the dollar rose to more than a seven-week high.

Oil has fluctuated between about $44 and $52 a barrel since early June after almost doubling from a 12-year low in February as supply disruptions from Nigeria to Canada and falling U.S. output trim a global surplus. While American crude stockpiles slid for a record ninth week through July 15, they still remain more than 100 million barrels above the five-year average.

"The bullish sentiment that pushed oil above $50 has evaporated," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. "We have massive crude inventories and more than ample fuel stockpiles as we near the end of the summer driving season."

West Texas Intermediate for September delivery fell 56 cents to settle at $44.19 a barrel on the New York Mercantile Exchange. It’s the lowest close since May 9. Prices declined 3.8% this week.

Brent for September settlement dropped 1.1% to $45.69 a barrel on the London-based ICE Futures Europe exchange.

Prices slipped 4% this week. The global benchmark closed at a $1.50 premium to WTI.

The Bloomberg Dollar Spot Index, which tracks the currency against major peers, increased as much as 0.5%. A stronger greenback reduces the appeal of dollar-denominated raw materials to investors.

U.S. crude inventories dropped by 2.34 million barrels last week to 519.5 million, the Energy Information Administration reported Wednesday. Gasoline stockpiles rose to 241 million barrels, the highest level since April, as refineries bolstered operating rates to the highest this year.

"We’re going from a crude glut to a refined product glut," said Thomas Finlon, director of Energy Analytics Group in Wellington, Florida. "Crude supplies have eroded for nine straight weeks but are still well ahead of where they were a year ago."

Oil-market news:

• Rigs targeting crude in the United States rose by 14 to 371, marking the longest streak of increases since August, according to Baker Hughes Inc. data.

• U.S. June gasoline demand rose 2.7% from a year earlier to 9.64 million barrels a day, the API reported July 22.

• Schlumberger Ltd. reported an unexpected loss for the second quarter and cut more jobs amid the slide in energy prices.

• Iran is in talks with Mitsui & Co. and Total SA as part of its push to attract $60 billion in foreign investment to more than double the country’s capacity to produce petrochemicals over the next decade.