Oil slides 2 percent on strong dollar, doubts of OPEC output cuts

Tue Jan 10, 2017 4:58pm EST
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By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices fell 2 percent on Tuesday to the lowest in nearly a month, extending the previous session's sell-off as the U.S. dollar strengthened and doubts mounted over whether producing countries would implement a deal to cut output.

Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC) appear to be reducing production, but it was unclear whether other big producers will follow suit.

Iraq, OPEC's No. 2 producer, said it would raise crude exports from its main Basra port to an all-time high in February. The country's southern oil exports in early January held steady near a record high, despite the agreed start of OPEC cuts, according to an industry source and loading data.

Oil prices "are consolidating at the lower levels ... after doubts emerged over the degree of compliance with OPEC production cuts as Iraqi exports remain high, as well as the more general pace of market rebalancing," Tim Evans, energy futures specialist at Citigroup said in a note.

"Fresh reports that non-OPEC producers Russia and Kazakhstan have reduced output have produced little price reaction, with the failure to rally on bullish news suggesting that the market is overbought and vulnerable to a further downward correction."

Brent crude LCOc1 settled at $53.64 a barrel, down $1.30, or 2.4 percent, after hitting the lowest level since Dec. 15 at $53.60. U.S. crude futures CLc1 ended down $1.14, or 2.2 percent, at $50.82 per barrel. The contract touched its lowest since Dec. 16 at $50.79.

Prices did not move much after settlement, when industry group the American Petroleum Institute (API) reported a 1.5 million-barrel build in U.S. crude stocks in the week to Jan. 6. Analysts had expected an increase of 1.2 million barrels, and official data from the U.S. government are due Wednesday morning.

On Monday, both contracts sank around 4 percent on doubts about global output cuts.   Continued...

A customer uses a petrol nozzle in a gas station in Nice August 8, 2012.  REUTERS/Eric Gaillard