Friday 10 July 2020

Oil set for 10pc fall in November as glut persists

LONDON, November 30, 2015

Oil prices on Monday were on course to end November some 10 per cent lower as a global supply glut showed no sign of easing and weak stocks and a strong dollar further weighed on prices.

Brent crude, the global oil benchmark, was down 6 cents at $44.80 a barrel at 0915 GMT, on track for a 10-per cent fall for the month.

US crude futures were trading 7 cents lower at $41.64 per barrel and looked likely to reach the same monthly milestone.

A selloff in Chinese stocks dragged on Asian markets on Monday and European markets also opened lower, paving the way for a bearish start to the week.

The dollar edged to a fresh 8-1/2-month high against a basket of major currencies on Monday, making greenback-denominated contracts, such as oil, more expensive for holders of other currencies.

"We are going to have some volatility this week as lots of market-moving events will take place," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

The week's highlight is an Opec policy meeting on Dec. 4 about whether to adjust its production strategy in light of weak oil prices.

Most analysts do not expect Opec to cut production, but they are mindful that Saudi Arabia could be inching towards the idea of working on price support measures with other oil producers.

Opec and Russia could make "some sort of co-ordinated attempt to reduce production", said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.

"The glut continues, but I do feel that it could be reversed quite quickly given the change in interest rates in the United States, which would indicate more demand."

Traders will be watching the US non-farm payrolls report due on Friday. A strong jobs report could seal the case for a interest rate hike at the US Federal Reserve's Dec. 15-16 meeting.

The Opec meeting should also include discussions about new supply from Iran, according to analysts at Morgan Stanley.

Iran, once the second-largest producer in Opec after Saudi Arabia, hopes to raise its crude exports by as much as 1 million barrels per day within months once sanctions aimed at its nuclear programme are eased.

Iran on Saturday offered about 50 oil and gas projects to be developed by foreign investors with local partners.

On Monday, Reuters will publish its monthly oil price poll and its Opec oil production survey, giving an indication of market consensus on the way ahead.

Other events this week include the European Central Bank meeting on Thursday where economists polled by Reuters expect the ECB to announce monetary policy easing measures. – Reuters

Tags: Opec | Dollar | oil price | ECB | Supply glut |

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