January futures fell as much as 2.2 percent in NY as the dollar gained, making commodities priced in the US currency more expensive.
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According to the latest report from Bank of America Merrill Lynch (BAML), the increasingly fragile fiscal position of Bahrain amid the significantly low oil prices is likely to prompt a downgrade in its investment grade credit to “junk”.
Oil prices may drop to as low as the mid- $20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said. Meanwhile, the spread between the global and USA domestic benchmark of crude stood at $2.47, below Wednesday’s level of $3.39 at the close of trading.
Markets were keeping an eye on developing geopolitical tension in the oil-producing Middle East. Jordan’s King Abdullah, a USA ally, would hold talks in Moscow on Tuesday with Russian President Vladimir Putin on how to tackle “terror groups” led by Islamic State in Syria, an official source said. The sharp fall in rigs in 1H15 prompted the market to anticipate that production would fall soon, bringing about a few support for crude oil prices and rig counts shortly after that. The reading rose last week, the first time in 11 weeks, despite a slide in U.S. oil prices since early October.
“Oil prices and the [U.S. dollar] strength have an inverse relationship and if the [dollar] does strengthen more, oil prices should be taking a hit”, said Daniel Ang, analyst at Phillip Futures.
U.S. West Texas Intermediate (WTI) crude futures were down 68 cents a barrel at $41.22 a barrel by 1413 GMT, having touched a session high of $42.75 following the Saudi statement.
Bijan Zanganeh, said on November 21, that he doesn’t expect any change in Organization of Petroleum Exporting Countries’ (OPEC) output policy.
Currently, Brent futures for January delivery are down by 1.88% at $43.82 per barrel on the London-based ICE Futures Europe exchange. Analysts said that while the supply demand balance remained shaky, traders were taking a step back from bearish indications.
For Asia, the losers from cheaper prices include the region’s biggest oil producer, China, followed by India, Indonesia and Malaysia, along with Australia’s emerging LNG industry.
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Both Brent and USA crude saw muted trading early in the session as a stronger dollar weighed on oil and other commodities.
