NEW YORK: Oil prices fell 2 percent on Tuesday to the lowest in nearly a month, extending the previous session’s sell-off as the U.S. dollar strengthened and doubts mounted over whether producing countries would implement of a deal to cut output.
Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC) appear to be reducing production, but it was unclear whether other big producers will follow suit.
Iraq, OPEC’s No. 2 producer, said it would raise crude exports from its main Basra port to an all-time high in February. The country’s southern oil exports in early January held steady near a record high, despite the agreed start of OPEC cuts, according to an industry source and loading data.
Oil prices “are consolidating at the lower levels … after doubts emerged over the degree of compliance with OPEC production cuts as Iraqi exports remain high, as well as the more general pace of market rebalancing,” Tim Evans, energy futures specialist at Citigroup said in a note.
“Fresh reports that non-OPEC producers Russia and Kazakhstan have reduced output have produced little price reaction, with the failure to rally on bullish news suggesting that the market is overbought and vulnerable to a further downward correction.”
Brent crude LCOc1 settled at $53.64 a barrel, down $1.30, 2.4 percent after hitting the lowest level since Dec. 15 at $53.60. U.S. crude futures CLc1 ended down $1.14, or 2.2 percent, at $50.82 per barrel. The contract touched its lowest since Dec. 16 at $50.79.
On Monday, both contracts sank around 4 percent on doubts about global output cuts.
The dollar rose .DXY, pressuring greenback-denominated oil.
Higher oil futures prices through December encouraged investors to buy large volumes of crude contracts and sliding prices could prompt many of these long positions to be unwound.
Rising oil production in North America is also pressuring prices. The U.S. Energy Information Administration sharply raised its forecast for 2017 U.S. crude output growth to 110,000 barrels per day. Last month it forecast a 80,000 bpd decline.
The average Canadian rig count for December was 209, up 36 from November and up 49 from a year ago, said Matt Stanley, a fuel broker at Freight Services International in Dubai.
“A 30 percent increase in Canadian rigs in a year … The bear in me is well and truly back,” Stanley said.
Weekly inventory data from industry group the American Petroleum Institute (API) is scheduled at 4:30 p.m. EST. Analysts have forecast a 1.2 million-barrel build in U.S. crude stocks in the week to Jan. 6. – Reuters
Story first published: 11th January 2017