Oil prices tumble on pick-up in drilling, strong dollar

US West Texas Intermediate fell 81 cents to $45.07, Brent fell 75 cents to $47.26

HONG KONG: Oil prices tumbled again on Monday on pick-up in drilling and a strong dollar as speculation swirled that the Federal Reserve could hike interest rates as soon as this month.

The commodity had earlier plunged on Friday, wiping out the previous day’s rally as analysts said a sharp fall in US inventories last week was likely a one-off, caused by import cutbacks as Hurricane Hermine ploughed through the Gulf of Mexico.

Remarks from two top Fed officials, backing a lift in borrowing costs, were also a drag on the market as the dollar rallied, making crude more expensive for anyone holding weaker units.

US West Texas Intermediate fell 81 cents to $45.07 on Monday, while Brent tumbled 75 cents to $47.26. Both contracts collapsed almost 4%.

News that oil firms had opened up more rigs to drill fuelled expectations US output would increase, at a time when demand remains weak.

“The market is still in surplus and there are high inventories, so we could see oil decline further from here, perhaps back to the low $40s,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney.

“If OPEC can get their act together and agree on a deal, it could trigger a bit of short covering.”

Traders are awaiting a meeting this month of key producer Russia and the Opec exporters club to address a global supply glut and overproduction crisis that has battered prices for the past two years.

However, while there have been soothing words from officials, analysts are sceptical that any deal will be struck at the gathering in Algiers.  

Published in The Express Tribune, September 13^th, 2016.

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