Business Standard

Crude climbs ahead of OPEC meet as dollar slips back

Image

Reuters SINGAPORE

By Swetha Gopinath

SINGAPORE (Reuters) - Crude oil prices extended gains on Friday, as the dollar slumped against the euro, although market focus is fixed on an OPEC meeting in Vienna where the group is expected to reiterate its high output strategy.

U.S. crude was trading up 23 cents at $41.31 per barrel at 0343 GMT, while internationally traded Brent was up 19 cents at $44.03. Both crude contracts settled up 3 percent on Thursday.

A 3 percent fall in the dollar against the euro over the past 24 hours held sway over oil prices as the Organization of the Petroleum Exporting Countries (OPEC) is widely expected to maintain its output ceiling of 30 million barrels per day (bpd) at its policy meeting on Friday.

 

"I'm inclined to doubt that OPEC will have much influence on oil prices at this stage," said Ric Spooner, chief market analyst at Sydney's CMC Markets.

"You can never be certain but I think we are unlikely to see any moves by Gulf countries to cut production, and until that happens it's probably not going to make much of a difference to outlook."

The re-entry of Indonesia into OPEC, after a seven-year break, and Iran's plans to ramp up output as soon as Western sanctions on the country are lifted, will have a bigger influence on outlook, analysts said.

"There is some probability that OPEC might in fact announce an increase in its quota by a million barrels a day to accommodate the re-entry of Indonesia as a member," Vyanne Lai of National Australia Bank said.

"It is likely there will be some knee-jerk reaction to prices post the OPEC meeting," Lai said, adding that some of the bigger producers may be forced to cut output to make room for increasing production from Iran.

NAB expects oil prices to stay between the high $40s and low $50s a barrel in the first half of 2016.

Sources told Reuters on Thursday there was little chance of Saudi Arabia making a formal proposal for OPEC output cuts, contingent on co-operation from non-OPEC, as reported by Energy Intelligence.

The euro rallied on Friday, knocking the dollar back, as the latest round of policy easing by the European Central Bank fell well short of market expectations.

A cheaper dollar is a positive for oil markets as it makes greenback-dominated contracts such as crude futures more affordable for those holding other currencies.

Traders are keeping an eye on U.S. non-farm payrolls data due Friday as it could help indicate the timing of a possible U.S. rate hike.

(Reporting by Swetha Gopinath; Editing by Joseph Radford and Richard Pullin)

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Dec 04 2015 | 9:20 AM IST

Explore News