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Crude oil futures - weekly outlook: September 22 - 26

Published 09/21/2014, 07:11 AM
Updated 09/21/2014, 07:11 AM
Crude oil futures struggle as dollar, supply glut concerns weigh

Crude oil futures struggle as dollar, supply glut concerns weigh

Investing.com - West Texas Intermediate oil futures declined on Friday, as concerns about weak demand and a broadly stronger U.S. dollar weighed.

On the New York Mercantile Exchange, crude oil for delivery in November shed 33 cents, or 0.36%, to end the week at $91.65 a barrel by close of trade on Friday.

For the week, New York-traded oil futures lost 62 cents, or 0.67%, the 11th weekly decline over the past 13 weeks.

The U.S. Energy Information Administration said September 17 that U.S. crude oil inventories increased by 3.7 million barrels last week, the first weekly gain in five weeks.

Total U.S. crude oil inventories stood at 362.3 million barrels, the highest level for this time of year since 2012.

A stronger dollar also kept pressure on oil and other dollar-denominated commodities. The greenback rose to its highest level in more than six years against the yen USD/JPY, while the euro EUR/USD slid to fresh 14-month lows after the Federal Reserve brought forward its outlook for rising interest rates.

For the end of 2015, the median forecast was 1.375% compared to a June forecast of 1.125%.

The U.S. central bank cut its monthly bond-buying program by another $10 billion following its two-day policy meeting on September 17, keeping the program on track to finish next month.

Markets interpreted the Fed's statement as hawkish, despite policymakers maintaining language suggesting that rate hikes would not happen for a "considerable time."

Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers increased their bullish bets in New York-traded oil futures in the week ending September 16.

Net longs totaled 203,648 contracts as of last week, up 8.4% from net longs of 186,612 in the preceding week.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for November delivery tacked on 69 cents, or 0.71%, on Friday to settle at $98.39 a barrel by close of trade.

For the week, the November Brent contract gained $1.28, or 1.3%, amid reports that the Organization of the Petroleum Exporting Countries could trim its 2015 output target by 500,000 barrels per day at its November meeting in light of weakening global demand.

London-traded Brent prices have slid in recent weeks on concerns that global supply remains ample while demand remains weak.

Meanwhile the spread between the Brent and the WTI crude contracts stood at $6.74 a barrel by close of trade on Friday, compared to $4.84 in the preceding week.

In the week ahead, investors will be awaiting Tuesday’s data on euro zone private sector activity, amid concerns that the recovery in the region is losing momentum. Preliminary data on manufacturing activity in China will also be closely watched.

The week will also bring a fresh look at the U.S. housing sector, with reports on both new and existing home sales, as well as Thursday’s data on durable goods orders and initial jobless claims.

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