NEW YORK – Oil prices steadied on Monday, holding recent steep losses after OPEC pledged to keep pumping at almost full tilt even though U.S. crude stockpiles are at their highest level in nearly six years.
Strength in the dollar, which jumped to a seven-month peak against the euro and a one-month high against the yen on Monday, kept pressure on prices.
U.S. crude oil prices ended down 2 cents to $48.65 a barrel on the New York Mercantile Exchange (search) after falling to a new three-month low of $47.60 earlier in the session. Prices have fallen around 17 percent from the record high at $58.28 struck in early April.
London's Brent crude oil was down 71 cents to $47.95 a barrel before a technical glitch interrupted electronic trade late in the European trading day.
Prices had fallen sharply after OPEC President Sheikh Ahmad al-Fahd al-Sabah said on Sunday the cartel would continue to supply more than 30 million barrels per day (bpd), the highest level in 25 years.
Middle East Gulf oil producers have been raising output since March to build up stocks ahead of the fourth quarter, when rising demand from Asia's emerging economies is expected to stretch world supplies.
Higher OPEC supplies have helped push U.S. crude stocks to their highest level since July 1999, but Kuwait's Sheikh Ahmad signaled no pullback in OPEC's extra supply.
"We will continue to focus on the market and will continue to supply the market," Sheikh Ahmad, who is also Kuwaiti oil minister, told reporters at a workshop in Kuwait.
Sheikh Ahmad said $40 a barrel was an acceptable price for the Organization of the Petroleum Exporting Countries' (search) basket of crude oils, nearly $6 below the basket's current value.
OPEC is scheduled to meet on June 15 to plan its production for the second half. Sheikh Ahmad said OPEC was unlikely to raise its formal output limit to match the actual supply.
Gains in the dollar have also tempted some investment funds to switch back out of commodity markets and into treasuries. A stronger U.S. currency makes dollar-denominated oil more expensive for buyers in non-dollar economies.
"It appears many players were forced to close their short-dollar, long-crude positions," said Washington D.C.-based analysts PFC Energy in a research note.
Crude oil speculators on the New York Mercantile Exchange cut their net long positions to a four-month low in the week ended May 1.
Prices were pressured last week by a report from the International Energy Agency (search) saying that demand growth in China, Europe and the United States was slower than expected.
Customs data showed on Friday that China's April crude oil imports surged 23 percent on a year ago to hit an all-time monthly high of 12.25 million tonnes.
But China's oil products imports fell 37 percent in the first four months as the Asian powerhouse relied on its own refineries to feed demand.
President Bush said on Monday it is in the best interests of the United States to help the fast-growing economies of China and India become more energy-efficient.
"When the global demand for oil is lower, Americans will be better off at the gas pump," Bush said.
U.S. forecasters predicted on Monday that the Atlantic hurricane season would bring up to 15 tropical storms and hurricanes, another busy season on the heels of one that battered U.S. oil production.
Oil production from the Gulf of Mexico was reduced by 45 million barrels between September and February, according to the Minerals Management Service, contributing to last year's spike in energy prices.