Oil prices drop due to strong dollar

Saudi Arabia and Qatar are considering Venezuela’s proposal for an equilibrium price of US$88 (S$124.50) a barrel, Venezuelan Oil Minister Eulogio Del Pino told reporters on Sunday in Tehran.

The black gold received fresh impetus and rebounded higher on Monday on the back of comments from Saudi Arabia to co-operate with other oil producers to bring price-stability in the markets.

“The overarching concern in this market is the growing inventory levels for crude, and that doesn’t seem to be easing despite the strong refinery runs we’ve been having”, said Phil Flynn, analyst at the Price Futures Group in Chicago.

Market data suggests oil traders are preparing for another downturn in prices by March 2016, as forecasts for an unusually warm winter dent demand and Iran prepares for post-sanctions crude oil exports. Brent crude, the global benchmark for oil prices, fell 0.34 percent to $44.51 for January delivery on the London ICE Futures Exchange. Crude prices were supported as well by the latest weekly reading on the United States oil rig count, which showed a drop of 10 rigs this week. We are destroying the price of crude oil.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at $3.11 a barrel, compared to $2.76 by close of trade on Friday.

“The market is quite sceptical that any resolve will occur between OPEC and non-OPEC producers”, Andy Lipow of Lipow Oil Associates said.

USA crude’s West Texas Intermediate (WTI) futures CLc1 rose 16 cents, or 0.4 percent, to $42.06 a barrel.

In other markets, Asian shares dragged their feet on Tuesday after a healthcare mega-merger failed to impress investors while the dollar held firm near an eight-month high as investors grew more convinced of a USA rate hike next month. WTI was trading down 3.01% at $40.64 in European trading hours.

“Given how low prices are it will take a lot to get them to move lower”, Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. The government data projected that hedge funds reduced their long positions on NYMEX crude oil by 17% for the week ending November 17, 2015-compared to the previous week. “The speculative market is the one that is controlling the market”, Del Pino said.