Oil Falls From 18-Month High Amid Dollar Gains, OPEC Doubts - 4 Jan, 2017 - Oil Falls From 18-Month High Amid Dollar Gains, OPEC Doubts - 4 Jan, 2017 -

Oil Falls From 18-Month High Amid Dollar Gains, OPEC Doubts – 4 Jan, 2017

Oil fell from the highest level since July 2015 as the dollar strengthened while doubts persisted about the ability of OPEC and its partners to balance the market.

Futures slipped on the first trading day of 2017 after rising 45 percent last year, the biggest annual gain since 2009. Prices touched an 18-month high earlier as output cuts by Kuwait and Oman signaled OPEC and its partners are delivering on their deal to stabilize the market. Oil fell from the session’s highs as a strengthening greenback reduced investor demand for commodities priced in the U.S. currency.

Oil rose in 2016 for the first time in three years as the Organization of Petroleum Exporting Countries and 11 other countries agreed to cut output starting Jan. 1 in an effort to reduce bloated global stockpiles. Libya, which isn’t party to the OPEC cuts, is ramping up output from its biggest oil field again, a reminder of how vulnerable the quest to clear the glut might be. Rigs targeting crude in the U.S. rose last week to the highest level since January.

“Too much faith has been put in OPEC and the other countries that have promised cuts,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “They have been increasing output the last few months, so the cuts will be like New Year’s crash diet, and we know how those end.”

West Texas Intermediate for February delivery fell $1.39, or 2.6 percent, to $52.33 a barrel on the New York Mercantile Exchange. It was the biggest decline since Dec. 14. The contract touched $55.24 earlier, the highest since July 6, 2015. There was no trading Monday because of the New Year holiday. Total volume traded was 31 percent above the 100-day average at 2:38 p.m.

Steaming Ahead

Brent for March settlement fell $1.35, or 2.4 percent, to $55.47 on the London-based ICE Futures Europe exchange. The global benchmark touched $58.37, the highest since July 15, 2015. It closed at a $2.18 premium to March WTI.

The U.S. Dollar Index, gauge of the greenback against 10 major peers, increased 0.7 percent after American ISM data showed a stronger-than-expected gain in the manufacturing index and a rise in prices paid that sent the dollar surging.

“The dollar is steaming ahead, which is taking the luster off this rally,” Thomas Finlon, director of Energy Analytics Group in Wellington, Florida, said by telephone.

OPEC countries and non-members including Russia and Mexico have agreed to trim output by about 1.8 million barrels a day. Kuwait, which is a member of OPEC, has reduced output by 130,000 barrels a day to about 2.75 million a day, Al-Anba newspaper reported, citing Kuwait Oil Co. Chief Executive Officer Jamal Jaafer. Non-member Oman is cutting 45,000 barrels a day from 1.01 million, the Oil Ministry’s Director of Marketing Ali Al-Riyami said on Oman TV.

Libyan Flow

Libya’s Sharara field will ship almost 1.9 million barrels this month from its Zawiya port near Tripoli, according to a loading program obtained by Bloomberg. That compares with a pumping rate from the field of almost 9 million barrels a month as recently as late 2014, before unrest halted flows. The field reopened last month and the country pumped 650,000 barrels a day.

“The market set new highs but that failed to be followed by sustained buying,” Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone. “This has been the recent pattern. It shows that there’s a lot of nervousness about whether these guys will follow through with their cuts and how fast U.S. and Canadian production picks up.”

Oil-market news:

  • U.S. crude supplies probably fell 2 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report on Thursday.
  • Russia pumped 11.2 million barrels a day in December, according to data from the Energy Ministry.

Source: Bloomberg

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