HOUSTON: Oil prices were trading lower on Monday as rising US output, a weaker physical market and recent dollar strength added to the pressure from a widespread decline across equities and commodities markets.
Brent crude futures were down $1.12, or 1.6 percent, at $67.46 a barrel at 2 p.m. EST (1900 GMT), while US West Texas Intermediate (WTI) crude was $1.53, or 2.3 percent, lower at $63.92.
“We’re definitely starting to raise some serious red flags, especially in the $67 area for Brent. If we can get a bounce off that area, that would suggest to us we have the possibility to work higher, but it would suggest the sideways consolidation period could continue,” said Brian LaRose, technical analyst at United-ICAP.
The monthly US jobs report on Friday showing the fastest wage growth in nearly nine years exacerbated a broader market selloff that was already under way as European stocks backed off record highs and a rising dollar dented commodities prices.
Wall Street’s three major indexes logged their biggest weekly losses in two years on Friday after the strong payrolls report. The S&P 500 and Dow Jones Industrials posted their worst weeks since January 2016 while the Nasdaq recorded its worst week since February 2016.
The Dow Jones Industrial Average shed another 1.4 percent in mid-afternoon trading on Monday, fueling concerns that oil prices could fall further.
“If you don’t see some signs in the equity markets finding their footing then that will be headwinds for the energy complex as a whole,” LaRose added.
Although volatility in oil is rising, it is still close to its lowest in three years.
The physical crude market has deteriorated in the last few weeks, as the price of North Sea oil hit its lowest in eight months, while Russian Urals crude changed hands last week at its lowest level in a year.
Meanwhile, maintenance and turnarounds at oil refineries are getting under way, which could impact oil demand. Motiva Enterprises LLC, the largest US refinery, started a planned one-month overhaul on Monday of its key crude processing unit at its 603,000 barrel-per-day facility in Port Arthur, Texas.
Oil, which recently hit the highest levels in nearly three years, has been pressured by rising US crude production, which could threaten the Organization of the Petroleum Exporting Countries’ effort to support prices.
Saudi Arabia over the weekend said it had cut the official selling prices for its crude to European customers.
US government data last week showed output climbed above 10 million barrels per day in November for the first time since 1970.
US energy companies added oil rigs for a second week in a row last week.
Source: Brecorder.com
