Crude Oil Slides On Rebounding Dollar

Oil prices fell on Friday ahead of the end of the peak-demand winter season in the northern hemisphere although ongoing supply cuts and the weakening dollar offered broad support to the market. Karim Sahib  AFP

As far as Norbert Ruecker, head of macro and commodity research for Julius Baer, is concerned, only one thing is clear: "We believe that today's oil prices project a too rosy picture".

However, if the U.S. shale producers do not operate rationally and expand their output aggressively over the next couple of years, we anticipate a slower recovery in oil and gas prices in the coming years.

Futures are on course for their biggest drop in seven weeks amid concern an investor frenzy for risky assets may be overextending markets, while a weak dollar that had lifted commodities is gaining back some strength as Treasury yields advance. Meanwhile, the greenback is recovering from the lowest level in three years as Treasuries extend their selloff at the start of a pivotal week of data and events.

The recent rally in oil prices had been fuelled by the United States dollar's six consecutive weekly slides.

USA crude inventories probably rose by 800,000 barrels to 412.4 million last week, according to Bloomberg survey before Energy Information Administration data on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures were at $66.34 a barrel up 20 cents, or 0.3 percent, from their last settlement. Analysts still expect that the struggle this week is minor and the prices are expected to bullishly fluctuate this week; they also expect that the oil prices are looking to push a massive rally.

Gold reached resistance at $1,366/oz before finding sellers and after having rallied $130 since December 12 and without any significant pullback, the yellow metal increasingly looks in need of consolidation, according to the expert. Total volume traded was about 84 percent above the 100-day average.

At 1218 GMT, the ICE March Brent crude futures contract was 40 cents/b lower at $69.06/b, while NYMEX March light sweet crude was down 64 cents/b at $64.93/b. The global benchmark crude traded at a premium of $4.11 to WTI, after reaching the smallest premium since August on Monday.

The Baker Hughes US oil rig count rose to 947 on the 26 January, that was up 11 on the previous week, but up a massive 235 on the same week a year ago, when the price of Brent crude was sitting around the $56 a barrel mark. Stockpiles fell to 411.6 million barrels through the week ended January 19, the lowest level since February 2015.

Oil consumption is surging as a result of growth in major economies, while OPEC and its allies have made repeated commitments to cutting their crude output by 1.8 million barrels per day (MMBPD).

Prices climbed 2.8 percent last week. On Monday, they fell 58c, or 0.9%, to $65.56.

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