Oil prices down as strong dollar overshadows OPEC cut optimism
By Nigar Abbasova
World oil prices returned to negative dynamics on November 18 as the strengthening U.S. dollar outweighed optimism that OPEC might agree production cuts in its highly anticipated Vienna meeting.
Brent crude futures were 13 cents down and stood at $46.36 per barrel, while U.S. West Texas Intermediate (WTI) recorded a decrease of 23 cents or 0.51 percent to stand at $45.19 per barrel.
The USD is deemed to be one of the biggest factors that determine the oil price, as oil contracts are settled in this currency. A stronger U.S greenback puts downward pressures on oil prices, making dollar-denominated oil more expensive for buyers in other currencies.
The dollar sprinted to its 13-year high against a basket of major currencies on comments by U.S. Federal Reserve Chair Janet Yellen, who said the interest rate increase could happen "relatively soon", indicating high chances of the rate hike in December.
Last time FOMC raised its key interest rate from a range of 0 percent to 0.25 percent to a range of 0.25 percent to 0.5 percent in December 2015 while the previous rise was fixed in June, 2006.
The strong greenback has managed to wipe out optimism that came from Saudi's Energy Minister Khalid al-Falih over a production cut agreement.
Falih earlier voiced his belief that the market was on its way to becoming balanced and that an agreement on putting ceilings on the production would speed the recovery.
His optimistic comments came ahead of a meeting of key oil exporters' officials scheduled for November 18, in Qatar’s capital Doha, where representatives from Saudi Arabia, Algeria, Russia, Iran, Kuwait, Libya, Venezuela, Bahrain, the United Arab Emirates, Qatar and Nigeria are expected to discuss details of a potential deal on output cuts.
Uncertainties over the deal, however, are still lingering in the market, due to certain non-supportive signs.
President of Venezuela Nicolas Maduro said CNPC, China's largest state energy group, and Venezuela's state oil company PDVSA will seek to boost production in the OPEC country by around 277,000 barrels per day.
Increasing oil output in Iran is also one of the issues casting doubts on the ability of the deal to oust a persistent global oil glut. Middle Eastern country overtook Saudi Arabia (the world’s biggest producer) as India's top oil supplier for the first time in October.
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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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