Oil falls on firmer dollar and profit-taking after OPEC rally
Global benchmark Brent crude futures LCOc1 were down 48 cents at $48.76 a barrel by 1206 GMT, but still around 6 percent higher than before Wednesday’s OPEC agreement.
U.S. crude CLc1 was down 18 cents at $47.65 a barrel, also about 6 percent higher than before the OPEC deal.
The dollar .DXY rose against a basket of currencies, making it more expensive for investors to hold dollar-denominated commodities such as oil.
“We’re seeing some profit-taking because it is a long time until the next OPEC meeting in November when individual quotas have to follow,” said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.
The Organization of the Petroleum Exporting Countries (OPEC) had agreed to cut output to 32.5-33.0 million barrels per day (bpd) from about 33.5 million bpd, estimated by Reuters to be August’s production level.
The details, including the quotas for each member and the implementation data, will be finalised at OPEC’s policy meeting in November.
“The group surprised us in Algiers and we cannot rule out that they will surprise us again,” BMI Research analysts said.
“However, we maintain our view that a collective cut will have little impact on a fundamental level.”
A persistent oil supply glut brought prices from mid-2014 highs above $100 a barrel to less than $50 today, prompting the oil producers’ group to find agreement on limiting output.
Russia, not an OPEC member but a large producer currently pumping crude at record high levels, said it would find a way to freeze production if the country reaches an agreement with OPEC members.
The United States, a non-OPEC country that is now the world’s biggest oil producer, said it had little faith in this week’s deal leading to higher prices in the long term.
Amos Hochstein, the U.S. energy envoy, said in a Reuters interview that the deal will either lead to higher U.S. production and trigger another price fall or allow U.S. producers to expand market share.
Investors are bracing for further oil price swings ahead of the November meeting.
“We are likely to see some volatility going into November’s meeting,” said Jade Fu, investment manager at Heartwood Investment Management.
“We continue to maintain reasonable exposure to energy through commodity-related sectors, such as U.S. high yield and private equity.” -Reuters