Monday, 19 February, 2018

Crude prices fall as dollar rallies and United States production rises

Oil Prices Eases, Gears For Best Month Weak Dollar Lifts Oil ETFs
| 31 January, 2018, 11:05

The price for Brent crude oil, the global benchmark, was down 1.14 percent as of 9:15 a.m. EST to $69.35 per barrel.

Oil lingers near the highest levels in three years amid supply caps by the Organization of Petroleum Exporting Countries and allied producers including Russian Federation.

“Loose fiscal policy in the US, a recovery in growth in Europe and an acceleration in EM (emerging market) growth have all combined to push the dollar lower and oil prices higher, ” Bank of America Merrill Lynch said in a note. A sharp contraction in Brent's premium to West Texas Intermediate may lead to further inventory gains as US exports grow less economical.

U.S. West Texas Intermediate crude futures were 13 cents, or 0.2 percent, lower at $65.43 at 0027 GMT. According to reports, this is the strongest start that the oil prices have in the last five years and all reports and forecasts are all expecting another price surge in the coming months.

JP Morgan said the increase was largely due to OPEC withholding supplies, but added it expected prices to fall towards the end of the year as markets become "flush with oil from (U.S.) shale and other unconventional oils".

The number of rigs operating in USA oil fields added by 12 to a total of 759 rigs last week, marking the highest level since August, oilfield service firm Baker Hughes said in its weekly report on Friday.


Iraq's southern export capacity is 4.6 million barrels a day and the country is "determined"' to reach 5 million a day by year-end, Oil Minister Jabbar Al-Luaibi said at a conference in London.

Still, the prevailing sentiment among experts is still cautiously positive, in part due to surging oil consumption as a result of growth in major economies: Tamas Varga, strategist for PVM Oil Associates, remarked, "The market is bullish [but] one side that could correct significantly could come from the strength in the US dollar". The Bloomberg Dollar Spot Index added as much as 0.4 percent. Oil is priced in USA currency, so a falling dollar can boost demand for crude from buyers using other currencies.

The dollar index had been below $90 since January 24, falling below $89 on Friday.

Investors are bracing "for the upcoming refinery maintenance season amid a strong [dollar]", ANZ Research said in a note, which also pointed to rising inventories as U.S. shale producers continue their battle with Opec.

Weighing on WTI prices, analysts told Reuters, is US crude supplies are projected to post a weekly rise for the first time in 10 weeks.

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