🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

Oil tumbles 2% to 3-week low on strong dollar, profit taking

Published 10/01/2023, 09:04 PM
Updated 10/02/2023, 03:30 PM
© Reuters. FILE PHOTO: Oil rigs are seen at Vaca Muerta shale oil and gas drilling, in the Patagonian province of Neuquen, Argentina January 21, 2019. REUTERS/Agustin Marcarian/File Photo
LCO
-
CL
-
NYF
-

By Scott DiSavino

NEW YORK (Reuters) -Oil prices fell about 2% on Monday to a three-week low as a higher-priced Brent contract expired, the U.S. dollar strengthened and traders took profits, concerned about rising crude supplies and pressure on demand from high interest rates.

On its first day as the front-month, Brent futures for December delivery settled $1.49, or 1.6%, lower at $90.71 a barrel, or down about 5% from where the November contract expired on Friday. That was the Brent front-month's biggest daily percentage decline since early May.

U.S. West Texas Intermediate crude (WTI) , meanwhile, fell $1.97, or 2.2%, to settle at $88.82 per barrel.

Analysts said some traders took profits after crude prices rose nearly 30% to 10-month highs in the third quarter.

Before the crude price pullback that started on Sept. 28, U.S. speculators boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges to the highest since May 2022, according to the U.S. Commodity Futures Trading Commission.

It is "highly likely that profit-taking by speculators is currently playing a role (in the recent price decline) and should cease weighing on markets as the days pass," analysts at energy consulting firm Gelber and Associates said in a note.

On Monday, the U.S. dollar rose to a 10-month high against a basket of other currencies after the U.S. government avoided a partial shutdown and economic data fuelled expectations the U.S. Federal Reserve will keep rates higher longer, which could slow economic growth.

Higher interest rates along with a stronger dollar, which makes oil more expensive for holders of other currencies, could dent oil demand.

"The global outlook is quickly taking a turn for the worse and that is both driving the king dollar trade again and weighing on the crude demand outlook," said Edward Moya, senior market analyst at data and analytics firm OANDA, noting that soaring bond yields were also pressuring crude prices.

In Europe, manufacturing data showed the euro zone, Germany and Britain remained mired in a downturn in September.

In China, the world's biggest oil importer, the World Bank maintained its forecast for 2023 economic growth at 5.1%, but trimmed its prediction for 2024, citing persistent weakness of its property sector.

MORE OIL COMING

Pumping more crude supply into the system, Turkey's energy minister said the country will restart operations this week on a pipeline from Iraq that has been suspended for about six months.

Additionally, Saudi Arabia could start to ease its additional voluntary supply cut of 1 million barrels per day (bpd), ING analysts said in a note.

© Reuters. FILE PHOTO: Oil rigs are seen at Vaca Muerta shale oil and gas drilling, in the Patagonian province of Neuquen, Argentina January 21, 2019. REUTERS/Agustin Marcarian/File Photo

OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) plus Russia and other allies, will meet on Wednesday but is unlikely to tweak its current oil output policy.

A Reuters survey showed OPEC oil output rose for a second straight month in September despite cuts by Saudi Arabia.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.