Wednesday, 26 September, 2018

Oil prices settle mixed amid weaker U.S. dollar, oversupply concerns

Russian Saudi energy ministers discuss oil cooperation Oil prices settle mixed amid weaker U.S. dollar, oversupply concerns
Nellie Chapman | 16 February, 2018, 05:08

West Texas Intermediate for March delivery slipped 40 cents to US$58.79/bbl on the New York Mercantile Exchange as of 10:16 London, an eighth decline in the past nine sessions.

But crude has since slid and hit a 2018 low of $61.76 this week, pressured by rising U.S. output and forecasts oversupply may persist. The first seeds began to sprout nearly a decade ago, and production really took off between 2012 and 2014. Oil tends to move inversely to the dollar, and has also of late been trading in tandem with stocks, which finished the day up more than 1 percent.

World oil prices fell significantly during the week.

In Q2, the country's production decreased to 1.485mbd and 1.592mbd in Q3. Just since the start of this year, output is up almost half a million barrels per day.

At the same time, global economic growth could turn out to be stronger than previously expected and this would help offset the impact of growing us production on prices. That was 635,000 barrels per day less than the previous week's average.

Analysts at Credit Suisse have an even more aggressive prediction.

Oil had been struggling to recover to levels seen before last week's plunge as investors are wary that OPEC's strategy of curbing output could backfire and lead to a resurgence in US shale production. Now, surging USA exports - largely banned by Washington until just two years ago - challenge the last region OPEC dominates: Asia.

The fuel market seems poised for a price correction amid rising supplies, financial turmoil and active positioning from hedge funds in the futures market.

There are a few reasons why the oil market has been able to absorb the influx of supply out of the well this time around.

Secondly, geopolitical factors have also played a role both tangibly and intangibly.

That's according to the International Energy Agency (IEA), which says United States crude output increased by a "colossal" 846,000 barrels a day in the three months leading up to November.

"We see U.S. crude as a supplement to our large base of crude" from the Middle East and Russian Federation, said a refinery manager for China's oil-major Sinopec, declining to be named as he was not cleared to speak to media.

The growth of North American shale production, which caused an estimated 5-percent increase in US crude output in 2017, has rocked the oil industry in the past few years, spurring OPEC and other traditional producers to cut output to trim global inventories.

Moreover, he pointed out that throughout 2017, the global economic recovery gathered momentum, with expected economic growth for the year improving from an estimated 3.2 percent at last year's Symposium to 3.8 percent today. "Until we see more positive signs that can impact the fundamentals of the market, it may be hard to even maintain current prices". "That buffer is [to assure] that if you have a surge [in demand] or issue in one of the countries you can replace that in the market and achieve a short and medium-term re-balance of the market", Al Mazrouei told The National, answering a question about the downsides of a weak dollar on prices. After settling above $70 per barrel last month, Brent crude oil prices have now given up all their gains and are hitting lows not seen since November.