Oil prices dip on strong dollar

Post was last updated: October 18, 2016

Oil prices edged lower on Monday, pulled down by a rising rig count in the United States and a strong dollar but expectations of an Organisation of the Petroleum Exporting Countries (Opec) intervention next month to curb production gave them a floor.

US West Texas Intermediate (WTI) crude oil futures were trading at $50.18 per barrel, down 17 cents from their last settlement, and after hitting a session low of $49.94 a barrel.

International benchmark Brent crude oil futures eased seven cents to $51.88 per barrel, after falling to as low as $51.56 a barrel earlier.

Traders said that WTI was under pressure from a report on Friday by oil services provider Baker Hughes showed U.S. drillers added four rigs in the week to Oct. 14. It was the 16th week in a row that oil drillers had gone without making cuts, indicating more production to come.

A firmer dollar also weighed on prices, as an expected hike in US interest rates later this year drove the U.S. currency to a seven-month high against a basket of currencies.

Dollar-traded oil becomes more expensive for holders of other currencies when the greenback strengthens, potentially limiting demand.

But analysts said that the market is fundamentally supported by expectations that members of the Opec would take action to support prices at their meeting in Vienna on November 30.

“It’s very hard for the Brent crude price to sell below the $50 a barrel market ahead of the November 30 meeting,” said Bjarne Schieldrop, chief commodities analyst at SEB.

He said that Opec kingpin Saudi Arabia sent a very clear statement about working to curb production and support higher prices, but added that an oversupplied physical crude market was capping further gains in prices.

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