Oil Slides 2% Due to A Stronger Dollar and Doubts About
OPEC Output Cuts
January 11, 2017
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
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, or 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.
Prices did not move much after settlement,
when industry group the American Petroleum
Institute (API) reported a 1.5
million-barrel build in U.S. crude stocks in
the week to Jan. 6. Analysts had expected an
increase of 1.2 million barrels, and
official data from the U.S. government are
due Wednesday morning.
On
Monday, both contracts sank around 4 percent
on doubts about global output cuts.
The dollar rose. DXY, pressuring
greenback-denominated oil. [USD/]
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.
Reuters