Oil Price, Dollar Creep Lower

  • Oil Price, Dollar Creep Lower

Oil Price, Dollar Creep Lower

"Oil has been unable to use the weaker U.S. dollar to continue its recovery rally from last week's three-month lows as rising USA production concerns continue to weigh upon the marketplace", said Henry Croft, research analyst at Accendo Markets.

Defying rising sentiment that oil markets remain oversupplied, some analysts say markets will tighten soon, arguing that the OPEC-led cuts will only start to bite from April, just as demand picks up as refineries return from current maintenance outages. Brent crude, the oil benchmark for much of Europe, was about 1% lower to $51.25/bbl.

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Kuwait is scheduled to host a ministerial meeting on March 26 comprising both OPEC and non-OPEC members to review compliance with the output agreement and to discuss whether cuts would be extended beyond June.

"We're close to the $49 mark, not too far from $50", Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone.

Producers and merchants increased their short positions, or bets on lower prices, to 739,736 futures and options during the report week, the highest level in a month. Production peaked in mid-2015 and fell by more than 1 million barrels per day by mid-2016.

Non-Opec oil supply is now projected to grow by around 400,000bpd this year to average 57.7mbpd, Opec said in said in its monthly market report.

Opec will meet 25 May in Vienna, Austria, to decide whether to extend its 1.2m bpd production cut.

"Supply is still plentiful across the Atlantic basin as can be seen in the high arbitrage volumes targeting Asia", due in part to a boost in production in the Mediterranean region and Brazil, JBC analyst Eugene Lindell said.

The bigger headwind to prices is also the re-emergence of shale output. Since the first week of August, U.S. output has surged from 8.45 million barrels per day to 9.11 million barrels per day.

The group wants stocks in the industrialised world to fall to the average of the past five years. Until then, it will be hard for oil prices to break higher.

The dollar sank to a four-week low against a basket of currencies after the US Federal Reserve raised interest rates for the second time in three months, as expected, but said that further increases would be gradual.