Oil market slips on rebounding dollar

6th November 2014, Comments 0 comments

Oil prices fell Thursday as the dollar rebounded after European Central Bank chief Mario Draghi said it was readying further monetary stimulus measures if needed to combat deflation and stagnation.

Brent North Sea crude for delivery in December sank 25 cents to $82.

70 a barrel in late afternoon deals in London.

US benchmark West Texas Intermediate for December shed 75 cents to $77.

93 a barrel compared with Wednesday's closing level.

"Crude oil (traded) lower on the combination of Draghi talking the dollar up and OPEC cutting the forecast for the amount of crude oil it will need to supply due to rising shale oil production," said Saxo Bank analyst Ole Hansen.

"In the annual World Oil Outlook, they forecast a drop in demand for the cartel's oil in 2017 to a 14-year low of just 28.

2 million barrels per day, more than two million below current output.

"The euro meanwhile tumbled against the dollar after Draghi revealed the ECB's readiness to take further steps to stimulate eurozone economic growth and counter the threat of deflation.

"The governing council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed," Draghi told reporters.

The news sent the European single currency sliding as low as $1.

2396, its lowest level since late August 2012.

The stronger greenback makes dollar-priced commodities cheaper for buyers using weaker currencies, which in turn tends to hit demand and prices.

Back in Vienna, the 12-nation Organization of the Petroleum Exporting Countries (OPEC) released its latest assessment of the global oil market.

"Crude oil prices came under renewed pressure today as OPEC cut its oil price forecasts," said Sucden analyst Myrto Sokou on Thursday.

"OPEC reported there would be 'a small decline in real values' over this decade along with a 'constant nominal price of $110 per barrel' between now and 2020," she added.

OPEC, which pumps a third of the world's crude, will hold its next production meeting in Vienna on November 27, amid concern over sharp price falls that have slashed its members' revenues.

In a rollercoaster week, the oil market had plunged on Tuesday after Saudi Arabia cut its prices for crude sold to the US market, with WTI at its lowest close since October 2011 and Brent at its lowest since October 2010 .

Analysts interpreted the Saudi move as an effort to maintain market share in North America against cheaper oil flooding from US shale fields.

Since mid-June, both Brent and New York oil prices have fallen by almost 30 percent in value amid concerns of a global supply glut.

New York crude then rebounded sharply Wednesday after the US Energy Information Administration (EIA) report showed a smaller-than-expected increase in crude oil supplies.

The EIA reported that US crude inventories grew by 500,000 barrels in the week ending October 31.

That was much less than the 2.

2 million barrel increase expected by analysts.

Over the four previous weeks, crude inventories had climbed by roughly 23 million barrels.

The market also rallied Wednesday following reports of a pipeline blast in Saudi Arabia.

However, state-owned oil firm Saudi Aramco said Thursday that its operations were unaffected by a leak and fire which hit a diesel fuel pipeline near the capital Riyadh.


© 2014 AFP

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