18 September 2014 – Brent crude dropped towards $98 per barrel on Thursday, pressured by a stronger dollar on fears about a looming US interest rate increase and a steep spike in US crude stocks.
Poor demand and abundant supplies have pushed down the oil benchmark to a 26-month low earlier this week, and have kept it below $100 for more than a week.
“There’s nothing to push it higher. The dollar is getting stronger and the overall market is weak with high inventories,” Mitsubishi oil risk manager Tony Nunan told Reuters.
The dollar climbed to its highest in more than four years against a basket of currencies amid indications that an increase in US interest rates might happen faster than expected when the Federal Reserve starts tightening monetary policy.
A stronger dollar makes dollar-priced commodities such as oil more expensive for buyers using other currencies.
US crude stocks rose 3.7 million barrels last week, defying analysts’ forecasts for a drop of 1.6 million barrels, due to climbing imports and lower refinery run rates, data from the Energy Information Administration data showed on Wednesday.
But Nunan said oil prices may be approaching their bottom, having fallen steeply from June and with markets looking forward to a potential output cut by the Organisation of the Petroleum Exporting Countries (OPEC).
Brent has lost around 15% since hitting a nine-month peak of $115.71 in June.
“We’ve come down so far that now with talks of OPEC cutting supply, I think we are pretty close to the bottom and the market could be moving sideways from here,” Nunan said.
OPEC Secretary General Abdullah al-Badri said on Tuesday that a 500,000-barrel per day cut in OPEC’s oil supply to 29.5 million bpd in 2015 was possible, although that was downplayed by other delegates who expected stronger winter demand to boost prices.
Prince Abdulaziz Bin Salman Bin Abdulazi, deputy oil minister of Saudi Arabia, OPEC’s swing producer, said that short-term price moves have “little meaning” for the kingdom, who views long-term oil market fundamentals as “robust”.
Potential supply risks have helped provide a floor to oil prices.
Libya’s oil production fell by about 200,000 bpd due to an outage at the El Sharara field, while Nigerian oil unions continued a strike which could affect exports.
*Bianca Bartucciotto – Upstreamonline