Oil Falls Toward Four-Week Low on Stronger Dollar
February 11 2019 - 11:23AM
Dow Jones News
By Dan Molinski and Christopher Alessi
-- Oil prices fell toward a four-week low Monday due to a
stronger dollar and simmering concerns over a U.S.-China trade
fight that could hurt the global economy and reduce oil demand.
-- West Texas Intermediate futures, the U.S. oil standard, were
down 1.8% at $51.78 a barrel on the New York Mercantile Exchange.
That puts prices on track for the lowest close since Jan. 14, when
they closed at $50.51 a barrel.
-- Brent crude, the global oil benchmark, was trading down 1.3%
at $61.28 a barrel on London's Intercontinental Exchange.
HIGHLIGHTS
Dollar: Oil prices fell nearly 5% last week, marking the biggest
weekly decline since late December, and a key culprit was a surging
dollar due to a very strong U.S. jobs report on Feb. 1. Oil, like
many commodities, is bought and sold in the U.S. currency, so oil
prices often move in the opposite direction of the dollar. The WSJ
Dollar Index was extending its gains Monday in New York, rising
0.3%.
"The US dollar is strengthening again today in spurring much of
today's early WTI weakness," said analysts at Ritterbusch and
Associates in a research note. "WTI appeared much more willing to
follow equities lower than higher last week with the strength in
the U.S. dollar evolving as the decider in pushing WTI values back
to below our expected $53 support in forcing us off of a bullish
and into a neutral camp."
U.S.-China Trade: Oil also continued to be pressured lower due
to worries that negotiations for a U.S.-China trade deal may not
happen as quickly as initially expected. "Trade talks are the main
issue for oil," said Phil Flynn at Price Futures in Chicago, noting
that oil prices fell last week when White House economic adviser
Larry Kudlow told Fox Business the U.S. and China are still miles
apart on a trade deal. "While that comment may be just a
negotiating tactic, the market took it seriously and went on to
post its worst week of the new year." Mr. Flynn added.
INSIGHT
Mixed Messages: Oil prices are "still trying to figure out what
lead to follow. On the one hand, there is the OPEC+ cut story, now
coupled with increasing issues around Venezuelan supply, and a
global equity market that is still pretty close to the rebound
highs set over the last two weeks," analysts at consulting firm JBC
Energy wrote in a note Monday. "At the same time," they added, "it
has to be argued that a lot of the economic data that has been
released over the last few days has really not been too
encouraging, and U.S.-Chinese trade talks are also seemingly not
progressing very fast."
OPEC: The oil cartel's latest plan to curb output should help to
rebalance the market within the first quarter of this year, United
Arab Emirates oil minister Suhail al-Mazrouei reportedly told
al-Arabiya television Monday. OPEC and 10 producers outside the
cartel, including Russia, agreed late last year to collectively
hold back crude output by 1.2 million barrels a day for the first
half of this year, part of an effort to rein in a burgeoning supply
glut and boost prices. As a result, OPEC has "reduced exports in
January sharply, tightening the physical market," according to
Martijn Rats, oil analyst at Morgan Stanley.
AHEAD
-- The U.S. Energy Information Administration releases its
monthly Short Term Energy Outlook on Tuesday.
-- OPEC releases its monthly oil market report on Tuesday,
followed by that of the International Energy Agency on
Wednesday.
Write to Dan Molinski at Dan.Molinski@wsj.com and Christopher
Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
February 11, 2019 11:08 ET (16:08 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.