By Christopher Alessi and Alison Sider
Oil prices wavered between gains and losses Tuesday as the dollar pared gains, but fresh signs of rising U.S. shale production appeared to put a cap on prices.
U.S. crude futures recently fell 35 cents, or 0.57%, to $61.01 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 23 cents, or 0.35%, to $64.72 a barrel on ICE Futures Europe.
Investors are trying to gauge whether surging production from U.S. shale formations will threaten the process of bringing oil supply and demand into balance, and the tension has contributed to the seesawing prices, said Gene McGillian, research manager at Tradition Energy.
"There's a bit of a battle being fought," he said. Prices had climbed in earlier trading Tuesday as equity markets gained and the U.S. dollar tumbled, Mr. McGillian said. Oil and the dollar often move in opposite directions because a weaker dollar makes oil, which is priced in greenbacks, less expensive for foreign buyers.
Still, production from U.S. shale formations is expected to rise by 131,000 barrels a day in April, to a record of 6.95 million barrels a day, according to the U.S. Energy Information Administration's latest drilling productivity report released this week.
"The rapidly growing U.S. shale production is making it virtually impossible for prices to rise," according to analysts at Commerzbank.
The EIA last week also raised its production estimate for the full year, saying it expects total U.S. crude production to rise by 1.4 million barrels a day in 2018. Total output should now average 10.7 million barrels a day this year, up from a previous forecast of 10.6 million barrels a day.
Meanwhile, the International Energy Agency last week said it expects the U.S. to overtake Russia as the world's largest oil producer by 2023, with output rising to 12.1 million barrels a day.
"The oil market is looking increasingly oversupplied," said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd., in a note Tuesday. "It appears that money managers are getting rid of their long positions and this is why the front-end spreads of the two main crude oil futures contracts have been drifting lower lately."
New indications of growing U.S. output come as the Organization of the Petroleum Exporting Countries -- which has been holding back output by 1.8 million barrels a day since the start of last year -- is divided over how high the price of oil should be. Saudi Arabia, the de facto leader of the oil cartel, would like prices at $70 a barrel or higher, while Iran would like them closer to $60 a barrel.
The split is driven by differing views over whether $70 a barrel would send U.S. shale companies into a production frenzy that could cause prices to crash.
Oil market participants are looking ahead to monthly reports from OPEC and the IEA this week to see whether the agencies increase their forecasts for U.S. crude production, according to Giovanni Staunovo, an analyst at UBS Wealth Management.
Gasoline futures fell 0.92% to $1.8765 a gallon. Diesel futures fell 0.06% to $1.8636 a gallon.
Write to Christopher Alessi at firstname.lastname@example.org and Alison Sider at email@example.com