Oil prices dip on dollar strength, macroeconomic concerns
By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices edged slightly lower on Monday, pressured by a strong U.S. dollar and gloomy economic prospects in Europe and Asia, but supported by ongoing supply outages in Nigeria.
The Organization of the Petroleum Exporting Countries said its production fell by 100,000 barrels per day (bpd) in May led by Nigeria. OPEC’s report pointed to a supply deficit in the second half if the group keeps pumping at May’s rate.
Brent crude oil futures fell 24 cents to $50.30 per barrel, by 12:27 p.m. ET (1627 GMT), after trading between $50.79 and $49.61.
U.S. crude was down 25 cents at $48.82 a barrel.
The dollar <.DXY> has risen about 1.4 percent from June lows, lifted by Brexit worries, concerns about Asia and nervousness about a potential U.S. rate hike. [USD/] A strong dollar makes fuel imports more expensive for countries using other currencies.
“Bit of an inflection point for the oil markets right now with macro factors and the rising rig count weighing in on the negative sentiment while the Niger Delta Avengers are a good reminder that geopolitics will likely get worse before they get better,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.
Worries that Britain will vote to leave the European Union sent stocks tumbling, and could further dent oil’s recent gains, traders said. There are also concerns about faltering growth in China, largely due to industrial overcapacity and spiralling debt. [MKTS/GLOB]
“Investors seem to have backed away from buying ahead of either this week’s FOMC meeting or Britain’s referendum on EU membership on June 23,” said Tim Evans, energy futures specialist at Citi Futures.
Uncertainty over this week’s U.S. Federal Open Market Committee policy meeting has pressured oil, though the U.S. central bank is expected to leave rates unchanged.
Two weeks of increasing U.S. rig counts have made some investors nervous about rising crude production.
Oil traders have already sold out of long positions that profited from a sharp rebound in crude prices from the lowest levels in more than a decade.
However, continued supply outages have buoyed prices.
On Monday, the Niger Delta Avengers group, which has claimed most of the latest attacks on the country’s oil infrastructure, spurned proposed talks with the government.
Additionally, some analysts expect oil demand in Asia and especially China to remain strong.
Vehicle sales in China rose 9.8 percent to 2.1 million units in May, the China Association of Automobile Manufacturers said.
“Against the backdrop of low international oil prices, Chinese crude oil demand will remain well supported this year as demand continues to gain traction from stockpiling activities and refining use,” energy consultancy FGE said.
“We expect Chinese crude oil imports to grow by 730,000-760,00 bpd this year,” it said.
(Additional reporting by Libby George in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and David Gregorio)