Oil below $40 a barrel as OPEC rolls over policy

Reuters:

 Oil prices fell on Friday after sources said OPEC had agreed to roll over its policy of maintaining crude production in order to retain market share and raise its output ceiling.Internationally traded Brent was down 91 cents, or 2.1 percent, at $42.93 at 9:21 a.m. EDT (1421 GMT), having fallen earlier this week to a low of $42.43, within cents of August’s 6-1/2 year trough.

U.S. crude was trading down $1.17, or 2.9 percent, at $39.91 per barrel.

OPEC had been widely expected to stick with its year-old policy, despite pressure from poorer members of the cartel for a cut in output to prop up the price of oil.

OPEC sources said it had agreed to raise its output ceiling to 31.5 million bpd at its meeting in Vienna, in what appeared to be an effective acknowledgement of existing production.

Again Capital founding partner John Kilduff told CNBC that forecasts of OPEC production levels put output above the current ceiling of 30 million barrels per day.

OPEC supply rose in November to 31.77 million barrels per day (bpd) from 31.64 million in October, according to a Reuters survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

“Overall, it looks like business as usual. The production cut needs to come from outside OPEC, so attention turning back to U.S. producers,” Saxo Bank senior manager Ole Hansen

In the last few weeks, investors have run up big bearish bets, or short positions, betting on a fall in the price of crude oil.
The dollar rose, which would ordinarily depress oil prices as this strength can encourage non-U.S. investors in crude to sell their holdings in exchange for a higher profit in their own currency.

But Thursday’s 2-percent slide in the greenback, triggered by a surging euro, left the dollar near its weakest in a month.

The dollar gained some ground after monthly U.S. government data showed a gain of 211,000 jobs in November, offering further evidence the Federal Reserve would raise interest rates for the first time in nearly a decade.

On the demand side, China is likely to double its strategic crude oil purchases next year to take advantage of a more than a 60 percent fall in oil prices since June 2014. Beijing will add 70-90 million barrels of crude to storage tanks in 2016 to build up its strategic petroleum reserves (SPR), according to most respondents in a poll of five analysts and data collected by Reuters analysts.

Original article:

www.cnbc.com