Commodities

Oil prices steady on weaker dollar, but doubts over output cuts linger

Reuters Singapore | Updated on January 12, 2018 Published on January 16, 2017

crude

Oil prices were steady on Monday, supported by a weaker dollar, although doubts that OPEC and other producers would fully implement announced crude output cuts held the market back.

Brent crude futures, the international benchmark foroil prices, were trading at $55.40 per barrel at 0758 GMT,within 0.1 per cent from their last close.

US West Texas Intermediate (WTI) crude futures were at $52.32 a barrel, also within 0.1 per cent of their last settlement.

Traders said that oil received some support from a weaker dollar, which makes fuel purchases cheaper for countries that use other currencies domestically, potentially spurring demand.

After spending much of the second half of 2016 in an upward trend, the dollar has fallen around 2.5 per cent against a basketof other leading currencies since its early-January peak.

The greenback is in particular focus this week as Donald Trump is set to take office as the next US president on Friday.

“Oil pricing will be driven this week by the movement of the US dollar rather than crude itself, with President-elect Trump's inauguration ... being the main event,” said Jeffrey Halley of OANDA brokerage in Singapore.

But traders said that doubts over full implementation of anannounced crude output cut from major producers, including the Organization of the Petroleum Exporting Countries (OPEC) and Russia, were holding back oil prices.

OPEC has said it would reduce its output by 1.2 million barrels per day (bpd) to 32.5 million bpd from January 1, and Russia as well as other non-OPEC members are planning to cut about half as much again.

However, Russian oil and gas condensate production averaged 11.1 million bpd from January 1-15, two energy industry sources said on Monday, down just 100,000 bpd from December. Russia has committed to a 300,000 bpd cut during the first half of 2017 as part of a global deal with OPEC.

Rising US oil output is also preventing crude from climbing further.

Goldman Sachs said it expected year-on-year US oil production to rise by 235,000 bpd in 2017, taking into account wells that have been drilled and are likely to start producingin the first half of the year.

Overall US oil output stands at 8.95 million bpd, up from less than 8.5 million bpd in June last year and back at similar levels to 2014, when OPEC decided to start a price war against US shale producers and sent the market into a tailspin.

Published on January 16, 2017
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