Oil falls as U.S. drills
Send a link to a friend
[September 12, 2016]
By Amanda Cooper
LONDON (Reuters) - Oil fell for a
second trading day in a row on Monday, after speculators cut their
bullish bets by the most in three months last week and U.S. crude
drillers added more rigs for a tenth week running.
Brent crude oil futures <LCOc1> fell 53 cents on the day to £47.48 a
barrel, by 0830 GMT (04:30 a.m. EDT), while U.S. West Texas
Intermediate futures <CLc1> fell 66 cents to $45.22 a barrel.
Traders said the price falls on Monday and Friday were a result of
increasing oil drilling activity in the United States, which
indicated that producers can operate profitably around current
"The idea that we will continue to bounce off the $50 per barrel
handle is proving correct," said Matt Stanley, fuel broker, Freight
Investor Services (FIS) in Dubai, pointing toward "the dynamic of
shale oil" as the main reason to have pulled prices back down.
Oil's near six-percent price decline since Sept. 8 partly reverses a
10-percent rally seen early in the month to around $50 per barrel.
Adding to the pressure on the oil price, the dollar rose against the
Australian dollar <AUD=D4> and most emerging-market currencies, as
investors priced in a greater chance of U.S. interest rates rising
next week, which forced up bond yields and dented the broader
"From that perspective, we’re getting a bit of a sell-off in oil,"
CMC Markets strategist Jasper Lawler said.
"Given the good run that oil has had, that was maybe the easy trade
to take when the dollar was rallying," he added.
When the dollar strengthens, non-U.S. investors tend to cash in on
their dollar-denominated assets, such as crude oil.
[to top of second column]
Rigging equipment is pictured in a field outside of Sweetwater,
Texas June 4, 2015. REUTERS/Cooper Neill
This correlation was at its most negative in over a month on Monday,
meaning the two are more likely to move inversely to one another
than at any time since early August.
Expectations of another flood of refined product exports from China
later this year added another negative note, as demand in Asia's
biggest economy and oil consumer stutters.
Speculative oil traders also became less confident of higher oil prices, cutting
their net long U.S. crude futures and options positions for a second consecutive
week last week, the U.S. Commodity Futures Trading Commission (CFTC) said on
Traders said they were still eyeing statements regarding a potential freezing of
oil output closely, although a broad agreement to meaningfully rein in
oversupply was not currently expected.
Even if exporters agree on freezing output around current levels, analysts said
that would do little to raise prices as most exporters are pumping out oil at or
near record levels, and have adapted to do so at lower prices.
(Addtional reporting by Henning Gloystein in SINGAPORE and Osamu Tsukimori in
TOKYO; Editing by William Hardy)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.