Crude set for weekly loss as supply glut, dollar drag
LONDON, November 6, 2015
Crude oil prices were on track to post weekly losses on Friday as an oversupply of physical oil and a strong dollar bedevilled the market.
Benchmark prices regained some ground in early trading, but any sustained recovery faced strong headwinds.
"We expect crude oil prices to remain under pressure in the short term as the stubborn global supply glut continues to dominate the market," Sucden senior analyst Myrto Sokou said.
Brent crude futures had risen 45 cents to $48.43 a barrel by 1256 GMT, still on track to fall more than two per cent from the previous week.
US crude futures were trading at $45.45 a barrel, up 25 cents from the previous close.
The gains followed steep falls the previous day on climbing US crude inventories, and analysts said oversupply would continue to pressure oil markets.
Any decline in weekly rig-count data from the United States due later on Friday could boost prices further as the market looked for indications that US oil production would slow.
"We're deep into the industry's cost curve," said Harry Tchilinguirian, global head of commodity strategy at BNP Paribas, adding that if there is a contraction in rigs, "the market can lift off this floor".
US shale producers are also looking for even more cost cuts for the coming year as they prepare for a longer downturn in prices.
But there are other near-term obstacles for price momentum, including the strong dollar and a persistent overhang of physical oil.
The dollar has gained almost 5 percent against a basket of currencies since early October, making oil more expensive for non-US investors.
US jobs data due later in the day was expected to help nudge the US Federal Reserve to be the first major central bank to raise interest rates since the financial crisis of 2008/2009.
Outside the United States, there has been little sign of lower oil output. A senior Opec delegate told Reuters the group is unlikely to cut output when it meets in December if rival producers are unwilling to help reduce supplies.
"With oil production of major producers strong, falling output from US shale will be insufficient to balance the oversupplied oil market over the next two years," BMI Research said.
BMI added that increased production from Russia and OPEC were serious obstacles to price recovery. - Reuters
