Oil Ends Higher on Dollar, OPEC
January 22 2018 - 4:25PM
Dow Jones News
By Alison Sider and Christopher Alessi
Oil prices ticked higher Monday, snapping a two-session losing
streak as the dollar fell and the market weighed signals from Saudi
Arabia that OPEC would be willing to extend production cuts beyond
2018.
U.S. crude futures rose 12 cents, or 0.19%, to $63.49 a barrel
on the New York Mercantile Exchange. Brent, the global benchmark,
rose 42 cents, or 0.61%, to $69.03 a barrel on ICE Futures
Europe.
Oil's trajectory Monday wasn't straightforward -- prices wavered
between gains and losses throughout trading. Oil dipped as the
dollar pared losses on signs that a U.S. government shutdown could
be resolved. But the dollar resumed its slide, which helped lift
oil prices, analysts said.
A weaker dollar makes dollar-traded oil less expensive for
foreign buyers, which can lift crude futures. The dollar's
influence on crude prices has been less pronounced in recent
months, but some observers say it is due to make a comeback as a
force moving oil prices. The currency has been pummeled in recent
weeks amid U.S. political uncertainty and signs that central banks
will tighten monetary policy more quickly in response to robust
economic growth.
"The losses in the dollar have reached a point where they're
going to be influential on commodity prices," said John Kilduff,
founding partner at Again Capital. Oil "really seemed to be finally
reacting to this dollar selloff."
Oil surged at the end of last year and in the first weeks of
2018, pushed higher by a combination of strong demand, renewed
geopolitical risk and tightening supplies following more than a
year of restrained output from the Organization of the Petroleum
Exporting Countries. Investors have amassed a record net bullish
position on crude prices.
But the rally started to sputter last week amid concerns that
the rapid rise in prices could bring on a wave of new production.
Oil prices fell Friday after the International Energy Agency
released its monthly oil market report, predicting U.S. crude
production would climb above 10 million barrels a day this year,
surpassing output from Saudi Arabia and rivaling that of Russia --
the world's two-largest crude producers.
"Oil prices had chalked up losses again last week for the first
time in five weeks, meaning their upward momentum seems to be
faltering for now, " according to analysts at Commerzbank.
But the International Monetary Fund said Monday that the global
economy will strengthen in 2018, which could mean another year of
big gains in demand for oil, something that took market
participants by surprise last year. And prices could still find
support from Saudi Arabia's ongoing commitment to hold back crude
output.
"We should not limit our efforts to 2018. We need to be talking
about a longer framework for our cooperation," Saudi Arabian Energy
Minister Khalid al-Falih said on the sidelines of an OPEC meeting
on Sunday in Oman. Commenting on an OPEC-led agreement with
nonmember allies like Russia to curb output, Mr. Falih said the
group's message should be: "This is something that is here to
stay."
OPEC, of which Saudi Arabia is the de facto leader, and 10
members outside the cartel agreed late last year to extend an
agreement to reduce the world's oil production by 1.8 million
barrels a day through the end of this year. The accord was first
struck at the end of 2016 to rein in a global oil glut that has
weighed on prices since 2014.
But others don't put much stock in talk of additional
cooperation and believe that OPEC's commitment could waver in the
face of higher prices.
"At close to $70 Brent, there's a little bit of lingering
concern about whether these producers will start to cheat," said
Gene McGillian, research manager at Tradition Energy. "I think the
market's vulnerable to a correction."
Gasoline futures rose 1.65 cents, or 0.89%, to $1.8801 a gallon.
Diesel futures fell 0.15 cent, or 0.07%, to $2.0569 a gallon.
Write to Alison Sider at alison.sider@wsj.com and Christopher
Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
January 22, 2018 16:10 ET (21:10 GMT)
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