By Henning Gloystein
SINGAPORE (Reuters) - Oil prices fell on Monday, with U.S. crude dropping nearly 3 percent to a six-year low as the dollar hit fresh highs and spare oil storage capacity runs low around the world.
U.S. crude fell to $43.57 (30 pounds) in early trading, its lowest since March 2009, before rebounding to $44.34 by 6:28 a.m., still down 50 cents. Brent was trading at $54.46 a barrel, down 21 cents.
The World Petroleum Council said that the low prices would lead to production and investment cuts.
"The oil price is now below a level which allows companies to explore and produce in the most difficult areas. So that will lead to the situation that some investment has to be cut," the council's President, Jozsef Toth, told Reuters on Monday in Seoul, South Korea.
Traders said the price falls were due to diminishing spare capacity to store excess oil as well as the strong U.S. dollar.
China has been taking advantage of low prices to build up its strategic petroleum reserves (SPR) but analysts say new spare capacity will only become available later this year, denting near-term import needs.
"While the low crude oil prices are expected to incentivise crude stockbuild (in China), stockpiling activities at the SPRs this year will remain constrained by available spare capacity," said Wendy Yong of energy consultancy FGE, adding that new SPR capacity would only become available later this year.
Spare capacity is also running low in the United States.
"Bearish comments from the International Energy Agency that the U.S. might soon run out of empty tanks to store crude and a suggestion that global supply was up 1.3 million barrels per day in February year on year at 94 million barrels weighed on sentiment," ANZ said.
Goldman Sachs said that a falling U.S. rig count would only translate into slightly lower production in the second quarter of this year.
Oil prices are also under pressure from the strong U.S. dollar, which remained close to multi-year highs.
The Fed's policy-setting committee meets this week with the expectation that it could tighten monetary policy as soon as June.
A stronger greenback makes commodities denominated in the dollar more expensive for holders of other currencies.
The euro slipped as low as $1.0457
