Oil prices fall on increasing OPEC exports, strong US dollar

Oil prices fall after nine straight days of gains

Oil prices fell on Wednesday after nine straight days of gains as investors grew concerned about a rising US dollar and OPEC’s ability of reign in production.

Brent crude futures were down almost 3.3 per cent to $48/barrel by 11:56 a.m. EDT and WTI crude futures traded at $45.30/barrel, down 3.8 per cent.

Falling oil prices put pressure on the energy sector, dragging Wall Street’s S&P 500 and moving it between positive and negative territory.

“The air is getting thin for oil prices. The price increase just ran out of steam, which is not very surprising, given the news flow of rising OPEC supplies,” Carsten Fritsch, senior commodity analyst at Commerzbank told Reuters.

Other analysts were concerned that the stronger US dollar means investors will find greenback-dominated commodities like oil less attractive.

According to data from Thomson Reuters Oil Research, OPEC exports rose in June by 450,000 barrels per day (b/d) to 25.92 million b/d.

The rise in OPEC production and exports is due to increased production in Libya and Nigeria, two cartel countries exempted from the OPEC supply cut pact.  Unrest in the two African nations had severely hampered their oil production, but in recent months, the industry has pumped more crude.

The head of the International Energy Agency told Reuters increased output from key oil producing states could dampen expectations that the global oil market would rebalance in the second half of the year.

Saxo Bank cut its year-end Brent crude price forecast from $58 dollars to $53/barrel.

“OPEC’s ability to maintain exports should be tempered by the need to keep more oil at home to meet increased domestic demand during the peak summer months,”  Ole Hansen, head of commodity strategy at Saxo Bank told Reuters.

Reuters reports some analysts and traders see technical signs that hint at a recovery.

“The longer term moving average systems need stronger moves over $51.50 in Brent and $49 to $49.50 in WTI which is where the 100-day and 200-day moving averages are,” Scott Shelton, broker at ICAP in Durham, North Carolina told Reuters.

“Spending more time up here to get the shorter term moving averages to cross would also generate buying.”

As well, with hot summer months upon us, US oil traders are hoping demand for crude rises and helps reduce bloated US oil inventories.

Analysts and traders are awaiting data on US crude stocks which has been delayed for one day due to the July 4th holiday in the US.

In a Reuters poll, analysts say they expect weekly crude stocks to drop by 2.8 million barrels.  Last week, the weekly data released by the American Petroleum Institute and the US Energy Information Administration showed a surprise increase in US crude stocks.