Monday, 09 November 2015 23:12
LONDON: World oil prices reversed Monday on supply glut woes, the strong dollar and signs of faltering demand from Asian powerhouse China.
In late afternoon deals in London, Brent North Sea crude for December dipped 36 cents to $ 47.06 a barrel.
US benchmark West Texas Intermediate (WTI) for delivery in December slid 49 cents to $ 43.80 per barrel compared with Friday’s close.
“The supply overhang in the United States will likely limit any protracted upside in front month WTI futures,” said Sucden analyst Kash Kamal.
“The outlook for the global market is similar with any potential upside in front month Brent futures limited by the steady flow of crude entering the market.”
He added: “With a lacklustre demand outlook and uncertainty regarding central bank policy around the world, investors have been unwilling to commit to any significant positions.”
A bullish US jobs market report Friday sent the dollar higher, which would make dollar-priced oil more expensive for holders of weaker currencies, hurting demand.
The US government said 271,000 new jobs were created in October, nearly double the number in September and much better than expected.
It also meant the unemployment rate fell to a seven-and-a-half-year low of 5.0 percent.
“That led to strong gains of the dollar on expectations for an increase in the interest rate by the Federal Reserve in their next meeting scheduled in December,” noted EY analyst Sanjeev Gupta.
A hike in interest rates encourages investors back to US assets for higher returns, pushing the greenback higher.
Meanwhile, data showing crude imports from China — the world’s second-biggest oil consumer — fell to the lowest level in five months also kept a lid on prices in the face of a world supply glut.
China’s crude imports fell to about 6.23 million barrels a day in October, Bloomberg News reported, quoting data from the Beijing-based General Administration of Customs.
Oil prices collapsed by 60 percent between June 2014 and January, thanks to a supply glut caused partly by booming US shale oil.
But OPEC, which has traditionally defended price levels by cutting output if needed, left its production target unchanged in November in a new Saudi-backed strategy.
OPEC also held its target at 30 million barrels per day in June, in a bid to maintain market share and put pressure on US shale oil producers — which need a higher oil price to be profitable than in traditional extraction methods.
OPEC kingpin Saudi Arabia — whose revenues have been slashed by slumping oil prices — warned on Monday of a supply crisis after massive energy investments were cancelled because of the sharp decline in oil prices.
“Around $ 200 billion of investments in energy have been cancelled this year,” Saudi vice minister of oil Prince Abdulaziz bin Salman told a roundtable meeting for Asian energy ministers in Doha.
He said energy companies are planning to cut between 3.0 percent and 8.0 percent of their investments next year.
“This is the first time since the mid 1980s that the oil and gas industry will have cut investment in two consecutive years,” Abdulaziz said.
The 12-member Organization of the Petroleum Exporting Countries (OPEC) holds its next output gathering in Vienna on December 4.
