Oil Extends Decline as Rising U.S. Production Weighs

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On Monday, oil prices prolonged declines, pulled down by indications of growing production in the United States that  would partially offset output cuts by the Organization of Petroleum Exporting Countries and other producers.

After President Donald Trump presented immigration curbs that generated criticism at home and abroad, uncertainty over the outlook for U.S policy also broadly influenced  the financial markets.

Oil trading was quiet with some Asian countries, including China, on holiday for the Lunar New Year. After the opening bell on Monday, the delivery of NYMEX crude for March declined 27 cents at at $52.90 a barrel.

Global benchmark Brent crude oil prices declined 25 cents at $55.26 a barrel at 1010 GMT, while U.S. crude futures fell 8 cents to $53.09.

The number of active U.S. oil rigs increased to the highest since November 2015 the previous week, according to Baker Hughes data, indicating  that drillers are taking advantage of oil prices above $50 a barrel.

The Organization of the Petroleum Exporting Countries and other producers, including Russia, agreed to reduce production by nearly 1.8 million barrels per day in the first half of 2017 to relieve a two-year supply overhang.

“We are in wait-and-see mode, I suspect at the moment. Oil has reached a fair value equilibrium level given the current supply and demand outlook,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Until we get anything to really disrupt that, we may not see too much change,” he said, adding the market may draw some comfort from official OPEC figures for January production.

However,  U.S. oil output has been increasing, with the International Energy Agency forecasting total U.S. production growth of 320,000 barrels per day (bpd) in 2017 to an average of 12.8 million barrels per day bpd.

“The rise in U.S. output should not be unexpected,” ANZ bank said in a note.

“However, we expect the reductions being made by OPEC will far exceed any rise in the U.S. and quickly reduce the global inventory that has been built up over the past two years,” it added.

Hedge funds and money managers boosted bullish wagers on U.S.crude oil to the highest level since mid-2014, the Commodity FuturesTrading Commission (CFTC) data showed on Friday, as agreed output cuts by the world’s top producers began to eat into a global glut.

In addition, on Sunday, President Donald Trump justified  his move to ban entry of refugees and people from seven Muslim-majority nations and stated the United States would continue issuing visas for all countries in the next 90 days as he faced increasing criticism at home and abroad and new demonstrations in U.S. cities.

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Oil Prices Drop as Increasing U.S. Production Could Offset OPEC Cuts

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On Monday, oil prices dropped as investors anticipate figures from OPEC later this week, which will give additional awareness into demand and supply movements.

On Tuesday, oil markets were mixed, supported by development in U.S. crude output and Saudi Arabia said it would strictly follow to a commitment to reduce production, but held back by doubt in financial markets that glut would be curbed.

In an effort to clear a global glut that has depressed prices for more than two years, The Organization of the Petroleum Exporting Countries (OPEC) has settled to reduce production by 1.2 million barrels per day (bpd) to 32.5 million bpd from Jan. 1.

Russia and other key exporters outside the Organization of the Petroleum Exporting Countries (OPEC) have stated they will also cut production.

However, investors have questioned that the Organization of the Petroleum Exporting Countries (OPEC) and its partners can trim production enough to drive up prices.

This Wednesday, January 18, OPEC releases its monthly output data, offering early indications on the agreement  signed late in 2016.

On the NYMEX, delivery of crude oil futures in February declined 12 cents, or 0.2 percent, to $52.25 a barrel.

Benchmark Brent crude oil increased 41 cents a barrel, or 0.7%, at $55.86 and U.S. West Texas Intermediate crude increase  27 cents, or 0.5%, to $52.64 a barrel.

The analyst believes that for the first quarter of 2017, the price of oil will be about the $55 a barrel-mark, until the real effect of the reductions are felt. Others offer hope for $60 per barrel.

However, anticipations  of  increasing  oil production in the United States, along with the U.S. federal holiday on Monday capped price gains.

Goldman Sachs  stated it anticipates YoY U.S. oil output to increase by 235,000 barrels per day in 2017, take into consideration wells that have been drilled and are expected to begin producing in the first half of the year.

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Gold Prices Inch Up in Asia as U.S. Jobs Data Ahead

On Friday, gold prices inched higher in Asia with the jobs statistic in the U.S.observe for indications on the predictions of the Fed Reserve rate hike path in 2017.

Delivery of gold for February on the Comex division of the New York Mercantile Exchange eased 0.20 percent to $1.178.95 a troy ounce. Copper futures increased  0.24% to $2.541 a pound.

Later on Friday, nonfarm payrolls data from the U.S. is projected to set the tone for gold as it is sensitive to higher interest rates and a stronger greenback. The Fed Reserve in December forecast as many as three rate hikes in 2017.

On Thursday, suddenly the gold prices rallied to a four week peak, as the  U.S. greenback moves further away from a 14 year high against a basket of major currencies following the release of  the statement from the Federal Reserve.

Minutes from the Fed’s December policy meeting displayed most officials thought the U.S. economy could develop more quickly because of tax reductions and infrastructure expenditure under President-elect Donald Trump’s incoming administration.

At the same time, policymakers “emphasized their considerable uncertainty” about future economic policy changes.

The minutes of the meeting also presented that policymakers assumed that Trump’s promises of fiscal stimulus could, if delivered, spur inflation, which would in turn lead to a quicker pace of rate increases this year.

On January 20, 2017, Trump will take office and has yet to plan his economic policies in details.

On Additional News

On Friday, oil prices were steady, as the beginning of supply reductions by Saudi Arabia and Abu Dhabi supported the market, however, uncertainties that all producers will carry out production cuts agreed on a landmark agreement last year kept the markets from increasing further.

Brent crude futures, the benchmark for international oil prices, were trading at $56.85 per barrel at 0238 GMT, down 4 cents from their close the prior day.

West Texas Intermediate (WTI) crude futures in the United States were at $53.74 a barrel, two cents below their last agreement.

Thursday’s prices increased after  reports of supply reductions from Saudi Arabia and Abu Dhabi coming into effect as part of efforts by the Organization of the Petroleum Exporting Countries and other producers to curb a global supply surplus.

Overall supply from Organization of the Petroleum Exporting Countries (OPEC) in the December  drop slightly to 34.18 million barrels per day (bpd) from a revised 34.38 million bpd in November, according to the reports.

Although traders stated oil markets were well supported by the agreed reductions, they said uncertainties remained that all producers would fully implement planned reductions.

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Oil Prices Increase on Expectations of Tightening Supplies

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On Wednesday, oil inched higher with top exporter  Saudi  Arabia projected to increase prices for its crude as part of intended supply reductions, although a strong greenback  and moderate economic development forecasts restricted gains.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) were trading at $52.65 per barrel at 0237 GMT, up 32 cents, or 0.6%, from the last settlement.

International Brent crude futures (LCOc1) increased 32 cents, or 0.6%, at $55.79 a barrel.

Traders stated the gains were because of  an expected tightening of physical oil supplies, as major producers like the Organization of the Petroleum Exporting Countries (OPEC) plan to reduce crude production from this month in an effort to end a global fuel excess that has dogged markets for more than two years.

In February, possibly reflecting a tightening market, top oil exporter Saudi Arabia is anticipated to increase the official selling price (OSP) for all its crude grades to Asia.

Official selling price (OSP) for crude delivered to customers around the globe is a key indicator in deciding the prices for crude futures like Brent or West Texas Intermediate (WTI).

In spite of the possibly tightening physical oil market, crude futures are being burdened by a strong U.S.-dollar, which makes it more expensive for countries to import dollar-traded fuel.

This week, the greenback hit a 14-year high (DXY) on the back of strong U.S. economic data.

“The dollar remains supported due to the fact that the Fed has not only turned hawkish but it has already started its policy tightening cycle, while the rest of the major central banks are pretty much dovish across the board,” Razaqzada said.

Both foreign exchange and crude changes will be impacted by the position of the global economy.

In spite of encouraging numbers in late 2016 and the first days of  2017, analysts said that growth prospects were moderate.

“The West ended 2016 on a strong note. The Eurozone picked up steam, the UK is defying gravity and the U.S. is on a roll. Note, however, that this strength isn’t fully feeding through into Asia.. China and Japan are expanding, sure, but only at a tepid pace,” said Frederic Neumann, co-head of Asia Economics Research at HSBC in Hong Kong.

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Oil Prices Drop on Profit Taking, Strong Greenback

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On Friday, oil prices decline in this Asian trade ahead of the Christmas and New Year Holidays, eroding some of the gains in the prior session as traders took profits.

Delivery of Brent futures for February declined 23 cents, or 0.4%, to $54.82 a barrel as of 0425 GMT after ending the prior session increase 1.1%.

U.S. West Texas Intermediate crude (CLc1) fell 26 cents, or 0.5%, to $52.69 a barrel after settling up 0.9% in the prior session.

“There’s some profit taking after the last session’s gains. Oil prices are also weaker due to the stronger dollar,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

“But overall, the fact the dollar and commodities are soaring either tells you demand for commodities has picked up or there is a need for more supply,” he added.

The dollar index (DXY) was a bit lower on Friday, but was still near to a 14-year high of 103.65 earlier this week.

A stronger greenback makes dollar-denominated commodities, including oil more expensive for holders of other currencies.

Since mid-2015, oil prices are trading around their highest levels, supported by an agreement by the Organization of the Petroleum Exporting Countries and non-OPEC oil producers to reduce production by nearly 1.8 million bpd from Jan. 1.

Barratt will expect U.S. crude to trade approximately $60 a barrel in the 1st quarter next year, with Brent around $62-$63 a barrel.

The output reductions will correspond with the first sale in January of U.S. crude from the country’s strategic petroleum reserve, New York-based tanker and energy consultancy Poten & Partners said in a note on Thursday.

“If all planned sales go ahead, the U.S. SPR could be reduced by some 190 million barrels between 2017 and 2025,” the note added. The current inventory is around 695 million barrels.

Even though the volumes were small, the “U.S. government is adding oil to the market at the same time that OPEC is trying to remove it,” Poten said.

Somewhere else, on Thursday, Talal Nasser Al Athbi, head of the Organization of Arab Petroleum Exporting Countries’ (OAPEC) Executive Bureau stated that supply and demand in global oil markets should rebalance during the 1st or 2nd quarter of next year.

Moves by Libya to increased oil output following the reopening of the country’s main oil pipelines in the west could be outshined by an unsettled political power struggle and the danger of new blockades.

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