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Oil prices fall as stronger dollar outweighs OPEC deal optimism

Oil prices

A rallying US dollar depressed oil prices in trading on Thursday.  BP photo.

Oil prices capped by dollar gains

By Ethan Lou

NEW YORK, Nov 17 (Reuters) – Oil prices settled slightly lower on Thursday, then fell as much as 1 per cent in the after-market session as a stronger dollar outweighed expectations of an OPEC deal to limit production.

Oil started the day in the positive, with U.S. crude briefly up by as much as $1, on optimism that the Organization of the Petroleum Exporting Countries (OPEC) would reach an agreement to cap production at its meeting in Vienna on Nov. 30.

Saudi Energy Minister Khalid al-Falih said he was optimistic about OPEC’s deal to limit oil output, while Venezuelan President Nicolas Maduro said OPEC members are ready to reach a “forceful” agreement, following a meeting with OPEC Secretary-General.

But prices fell after the dollar index tapped a 13-1/2-year high on strong U.S. economic data and comments by U.S. Federal Reserve Chair Janet Yellen that bolstered the case for hiking interest rates next month.

The stronger dollar makes the greenback-denominated crude more expensive for holders of other currencies.

“The strength in the dollar, that rate hike being priced in, is more of a concrete thing than the rumors and murmurs and ongoing rhetoric related to OPEC,” said Matt Smith, director of commodity research at energy data provider ClipperData.

Brent crude settled down 14 cents a barrel at $46.49, before falling further to $46.12 by 3:21 p.m. (2021 GMT), down 51 cents, or 1.1 per cent.

U.S. West Texas Intermediate crude closed 15 cents lower at $45.42. It fell in post-settlement by 56 cents, or 1.2 per cent, to $45,01.

The market was also still under pressure from U.S. Energy Information Administration data on Wednesday that showed a larger-than-expected crude build of 5.3 million barrels in the week to Nov. 11.

Stockpiles at the U.S. delivery hub for crude futures in Cushing, Oklahoma, which the EIA said increased nearly 700,000 barrels last week, rose 303,001 barrels in the week to Nov. 15, according to traders, citing energy monitoring service Genscape.

Crude inventories were also rising elsewhere, thanks to record output by OPEC, which pumps around 40 per cent of world oil supply.

“The name of the game is ‘volatility’ as confusing signals are arriving before OPEC meets,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.

“We have evidence of oversupply – U.S. stocks rising – versus hopes for some action by OPEC.”

(Additional reporting by Christopher Johnson in London and Mark Tay in Singapore; Editing by Marguerita Choy)

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