Oil Price Steadies as Weak Dollar Balances Oversupply
LONDON: Oil prices steadied on Friday as a sharp fall in the dollar balanced evidence of growing oversupply, with core OPEC producers pumping near record levels.
A Reuters monthly survey of output from the Organization of the Petroleum Exporting Countries on Friday showed the cartel has pumped more than 32 million barrels per day (bpd) this month, up 140,000 bpd from June. OPEC/O
Saudi Arabia has been pumping around 10.6 million bpd, close to its highest-ever level, the survey showed, helping keep supply well above global demand and filling storage tanks.
But a fall in the dollar after weaker-than-expected US employment data limited price declines. The dollar was down more than 1 percent against a basket of currencies.
Brent crude oil was down 25 cents at $53.06 a barrel by 1350 GMT. US light crude was down 30 cents at $48.22 a barrel.
Commerzbank’s head of commodities research in Frankfurt, Eugen Weinberg, said OPEC must eventually cut back on production to avoid much lower oil prices.
“We are also hopeful that OPEC will agree on a stricter quota discipline at its December meeting,” Weinberg said.
The fall in oil mirrored a general sell-off in commodities on worries about demand in China, the world’s biggest user of energy and many key materials such as copper.
China’s state planner said on Friday a slowing economy must not be allowed to morph into social risks as the volatile Chinese stock market fell again.
“All commodities are down,” said Abhishek Deshpande, oil analyst at Natixis.
“Commodities face weak demand, excess supplies and weakness in China. More weakness is ahead of us.”
Brent headed for its fifth consecutive weekly fall.
OPEC members produced around 31.25 million bpd in the second quarter, about 3 million bpd more than daily demand, a separate Reuters survey showed earlier this week.
The surplus oil has filled stockpiles around the world, driving prices down sharply. Both major crude oil benchmarks are down more than 50 percent from a year ago.
Chart analysts said oil futures looked weak.
Tamas Varga, analyst at London brokerage PVM Oil Associates, said a brief pause in the downtrend appeared to be over.
“Today hopefully will (tell us) if the relatively stable performance of the last two days is a correction, or the market actually is about to bottom out. From the technical perspective it is probably the former,” Varga said.