Brent crude dips below $55 a barrel on a strong dollar and growing fears that supply cut efforts won’t be effective
Oil prices fell more than two per cent today to their lowest level in almost a month, taking global benchmark Brent crude back below the $55 a barrel mark.
Brent fell 2.4 per cent, or $1.29, to $53.65 a barrel in late evening London time.
West Texas Intermediate crude, meanwhile, was testing $50 a barrel – the US benchmark fell 2.2 per cent, around $1.14, to $50.82 a barrel.
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Oil markets have been weighed by a strengthening dollar this week because the commodity is a dollar-denominated stock, which makes it more expensive for buyers of other currencies to buy oil when the greenback is rallying.
Although major producers such as Saudi Arabia and other members of the main oil consortium the Organisation of the Petroleum Exporting Countries (Opec) look to be cutting production in line with a November agreement, it's unclear whether other big producers will follow suit.
This has been the major factor hampering prices, after Opec's second largest producer, Iraq, said it will raise crude exports from its main Basra port to an all-time high next month.
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Oil prices "are consolidating at the lower levels … after doubts emerged over the degree of compliance with Opec production cuts as Iraqi exports remain high, as well as the more general pace of market rebalancing," Tim Evans, energy futures specialist at Citigroup said in a note.
Ramped up production in the US, which could be pushed even higher by President-elect Donald Trump comes into office on 20 January, has also worried analysts.
Data released by US oilfield services provider Baker Hughes on Monday showed US energy companies added oil rigs for the 10th week in a row to 529, extending a recovery in activity into an eighth month.
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Barclays has said it estimates the US rig count to rise to 850 to 875 by the end of this year and for spending on exploration and production to get a 27 per cent boost.
Today, in its monthly Short-Term Energy Outlook the US Energy Information Administration forecast that oil output from the US will increase 1.3 per cent, reaching 9m barrels per day (bpd). This has been increased from an earlier forecast of a 0.9 per cent fall.
Next year, the body has estimated crude production will rise another 3.3 per cent to 9.3m bpd.