Oil pinned near 3-month lows as gloom grows

Kuwait Times - - BUSINESS -

Oil fell to its low­est in three months yes­ter­day, as the prospect of an­other year of over­sup­ply and weak prices over­shad­owed chances that OPEC will reach a deal to cut out­put.

Don­ald Trump’s sur­prise vic­tory in last week’s US pres­i­den­tial elec­tion has boosted stocks and the dol­lar, but un­der­mined much of the com­modi­ties com­plex, in­clud­ing oil, which has sagged as ex­pec­ta­tions that the world’s largest ex­porters will agree to re­duce out­put this month have waned.

Brent crude fu­tures fell 43 cents on the day to $44.32 a bar­rel by 1205 GMT, while NYMEX crude fu­tures shed 56 cents to trade at $42.85 a bar­rel. “In the same way that a strong OPEC agree­ment was needed to con­tinue the rally above $55, a lack of agree­ment will be needed to break be­low $40 and right now, we’re at $45,” Petro­ma­trix strate­gist Olivier Jakob said. “So I think on a risk ba­sis, we’re start­ing to be a bit more con­cerned about the up­side price risk, than about the down­side.” OPEC plans to cut or freeze out­put, but an­a­lysts doubt the group’s abil­ity to reach an agree­ment at its meet­ing on Nov 30. The Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries said on Fri­day its out­put hit a record 33.64 mil­lion bar­rels per day in Oc­to­ber, and fore­cast an even larger global sur­plus in 2017 than the In­ter­na­tional En­ergy Agency on Thursday. Yet, Saudi En­ergy Min­is­ter Khalid al-Falih has said it was im­per­a­tive for OPEC to reach a con­sen­sus on ac­ti­vat­ing a deal made in Septem­ber in Al­giers to cut pro­duc­tion. “OPEC know what needs to be done but too few mem­bers will agree to take the pro­duc­tion pain for the price gain, know­ing also that the price gain in­cen­tivizes non-OPEC to pro­duce more, length­en­ing the re­bal­anc­ing process,” PVM Oil As­so­ciates an­a­lyst David Hufton said.

The dol­lar in­dex hit an 11-month peak on Mon­day, driven by an ag­gres­sive sell­off in bonds that has pushed Trea­sury yields to their high­est since Jan­uary. Or­di­nar­ily, a strong dol­lar would push oil lower, but the cor­re­la­tion be­tween the two is at its most pos­i­tive in two months, sug­gest­ing they are more likely to move in lock­step with one an­other than in op­po­site di­rec­tions. Data from the In­ter­Con­ti­nen­tal Ex­change on Mon­day showed in­vestors de­liv­ered the largest weekly cut on record to their bets on a sus­tained rise in the price of oil. — Reuters

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