- Saudi Arabia And Other OPEC Producers Looking To Increase Production -WSJ
- Chinese demand fears and the strong dollar are also weighing on prices
NEW YORK, Nov 21 (Reuters) – Oil prices fell to their lowest level since early January on Monday after the Wall Street Journal reported that Saudi Arabia and other OPEC oil producers are considering a daily production increase of half a million barrels.
Brent crude oil futures for January fell $4.07, or 4.7%, to $82.93 a barrel at 11:43 a.m. EST (1643 GMT). US West Texas Intermediate (WTI) crude oil futures for December fell $4.48, or 5.6%, to $75.60 ahead of contract expiration later Monday. The more active January contract was down $4.05, or 5%, to $76.04.
An increase of up to 500,000 barrels per day (bpd) will be discussed at the OPEC+ meeting on Dec. 4, The Wall Street Journal reported.
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“It’s hard to believe they’re entering a market that’s basically trading contango,” said Bob Yawger, director of energy futures at New York’s Mizuho, referring to the effect of the current discounted oil futures trading on later-dated contracts. “That’s playing with fire.”
The Organization of Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, recently cut production targets and Saudi Arabia’s de facto leader, the energy minister, said this month that the group will remain cautious.
Releasing more oil at the same time as weak Chinese fuel demand and a strong U.S. dollar could push the market deeper into contango, encouraging more oil to go into storage and pushing prices down even further, Yawger said.
Expectations of further rate hikes have supported the greenback, making dollar-denominated commodities like crude oil more expensive for investors.
Against the Japanese yen, the dollar rose 0.9% to 141.665 yen, on course for its biggest one-day gain since Oct. 14. read more
“Aside from the weakened demand outlook due to China’s COVID restrictions, a rebound in the US dollar is also a bearish factor for oil prices today,” said CMC Markets analyst Tina Teng.
“Risk sentiment is becoming fragile as all the economic data from the recent major countries point to a recession scenario, especially in the UK and the Eurozone,” she said, adding that the US Federal Reserve’s aggressive comments last week also raised concerns about economic growth in the US. perspective.
China’s number of new COVID cases remained close to April’s peaks as the country battles outbreaks nationwide.
The spread on first-month Brent crude futures narrowed sharply last week as WTI turned into contango on the back of diminishing supply issues.
Additional reporting by Noah Browning, Florence Tan and Emily Chow Editing by Jason Neely, David Goodman and David Gregorio
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