Oil falls on strong dollar, high crude supplies despite planned cut

SINGAPORE, Nov 25 (Reuters) – Oil prices fell more than 1 percent on Friday as a strong dollar and a rise in Saudi supplies to some Asian clients, weighed on markets, despite a planned OPEC-led output cut to be decided next week.

International Brent crude oil futures were trading at $48.31 at 0650 GMT, down 69 cents, or 1.4 percent, from their last close, although overall activity was thin after the U.S. Thanksgiving holiday and ahead of the weekend.

U.S. West Texas Intermediate (WTI) crude futures were at $47.33 per barrel, down 63 cents, or 1.3 percent, from their last settlement.

Traders said the main drag on prices on Friday was the strong dollar, which this week hit levels last seen in 2003 against a basket of other leading currencies.

A strong dollar, in which oil is traded, makes fuel purchases more expensive for countries using other currencies at home, potentially crimping demand.

Reports that Saudi Aramco would in January increase oil supplies to some Asian customers also weighed on markets, traders said.

A Saudi-led plan to agree on crude output cuts from the Organization of the Petroleum Exporting Countries (OPEC) and other producers next week would only impact supplies from February 2017 as most exporters sell their supplies two months ahead.

OPEC is due to meet on Nov. 30 to coordinate a cut, potentially with non-OPEC members like Russia, the world’s largest producer, but there is disagreement within the producer cartel as to which member states should cut and by how much.

Most analysts believe that some form of a production cut will be agreed, though it is uncertain whether this will be enough to prop up a market that has been dogged by a fuel supply overhang for over two years.

"We do expect some form of agreement, but oil market reaction will hinge on the credibility of the proposed action," said U.S. investment bank Jefferies on Friday, adding that recent output increases to record levels in many countries now required a deep cut for it to significantly lift oil prices.





"The surge in OPEC output since August has shifted the market back into oversupply and re-balancing will be deferred until the second half of 2017 without a cut of at least 700,000 barrels per day," Jefferies said.

Latest Comments

Your email address will not be published. Required fields are marked *