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Wednesday, October 23rd, 2019

Oil Prices Slip on Stronger Dollar and Russia Comments

by October 21, 2016 General

By Jenny W. Hsu
Crude futures fell again in early Asia trade Friday, weighed down by a strengthening dollar and comments by Russia’s top oil producer that it could increase its production if demand requires.On the New York Mercantile Exchange, light, sweet crude futures for delivery in November was last traded at $50.36 a barrel, down $0.57 in the Globex electronic session. December Brent crude on London’s ICE Futures exchange slipped $0.21 to $51.17 a barrel.Since oil transactions are done in dollars, a stronger greenback means a higher cost for oil traders and investors who hold other currencies. The Wall Street Journal Dollar Index, which pits the dollar against a basket of currencies, was last up 0.16% at 88.49.Oil prices have fallen for the past two days after U.S. oil prices hit a fresh one-year high in Wednesday. The drop reflects the sentiment that the recent rally is unsustainable as the world remains oversupplied and the glut is shrinking at a slower pace than previously thought.The view was further reinforced Thursday by Igor Sechin, the chief executive of Russia’s biggest oil producer, Rosneft, who said his country has the capacity to raise output by as much as 200 million metric tons a year, or 4 million barrels a day, according to Russian media. In September, Russia’s total oil production hit a historical high of an average of 11.2 million barrels a day, cementing its position as the largest producer in the world.“Oil prices appear to be extremely reactive to comments relating to higher production, especially during this period when oil prices are pricing in a potential OPEC cut later in November,” said Barnabas Gan, an economist at the Singapore-based bank OCBC.Russia has expressed interest in the past in collaborating with OPEC in a production cut but the lack of a firm and clear commitment from Moscow is making some people in the industry jittery. Without Russia’s participation, OPEC’s plan to cut production by 200,000 to 700,000 barrels a day could flop because members wouldn’t want to cut their own production in fear they will lose market share to non-OPEC producers.All eyes will be on the meeting between Russian Energy Minister Alexander Novak and Saudi’s oil minister this weekend.However, even if a deal is struck between OPEC members and Russia to rein in production, the world’s output might still outpace demand give the “risk that a further recovery in production from Iran, Libya, and Nigeria could offset at least some of the cuts allocated to other countries,” said Tim Evans, a Citi Futures analyst.The acceleration in the number of active oil rigs digging for oil in the U.S. is also stoking worries that higher oil prices will just entice more U.S. shale players to widen their spigots.Falling demand in Asia for refined oil products such as diesel is also raising concerns. A BMI Research report stated excluding China, average combined diesel stockpiles in South Korea, Japan and Singapore the first eight months of the year are 3.4% higher than the same period last year, and 2.6% higher than two-year average levels, showing that the apparent diesel glut in the region isn’t close to ending.Nymex reformulated gasoline blendstock for November–the benchmark gasoline contract was last at $1.4916 a gallon. ICE gasoil for November changed hands at $460.50 a metric ton, down $1.25 from Thursday’s settlement.Write to Jenny W. Hsu at