Oil fell towards US$49 a
barrel on Monday, pressured by high output from Middle East OPEC members and as
a stronger U.S. dollar weighed on commodities.
Reuters
report continues:
Iraq,
which has exported more crude from its southern ports in August, will continue
ramping up output, its oil minister said on Saturday. Top exporter Saudi Arabia
has kept output at around record levels this month.
Brent
crude was 85 cents lower at US$49.07 a barrel at 1323 GMT. The global benchmark
is down more than 7 percent from its 2016 peak of US$52.86 reached on June 9.
U.S. crude was also down 85 cents, at US$46.79.
"A
much stronger U.S. dollar is causing selling pressure today," said Carsten
Fritsch of Commerzbank. "Speculative financial investors in particular are
likely to use this as an opportunity to take profits."
The
U.S. currency rose to a three-week high against the yen on Monday after the
Federal Reserve bolstered expectations that it would increase interest rates
soon.
A
rise in the dollar makes dollar-priced commodities such as crude more expensive
for holders of other currencies, and tends to put downward pressure on oil prices.
The
comments about high oil output have dampened expectations that OPEC and outside
producers such as Russia will agree steps next month to support prices such as
a production freeze, following the collapse of a similar effort in April.
"The
market is increasingly likely to discount the outcome of the event, given, even
in the instance of a freeze being agreed, compliance will be an issue,"
Barclays said in a report.
Members
of the Organization of the Petroleum Exporting Countries are due to meet informally
in Algeria on Sept. 26-28 on the sidelines of the International Energy Forum.
Russia is also expected to attend the IEF.
Oil
prices are less than half their level of mid-2014 because of a persistent
supply glut. The chief executive of U.S. oil company ConocoPhillips, Ryan
Lance, said at an industry conference in Stavanger, Norway, he believed
oversupply would extend into 2017.
Meanwhile RT
USA reports that Riyadh’s foreign reserves dropped to US$555 billion, down US$6
billion in July, as low oil prices continue to eat up the country's assets
abroad.
Saudi
Arabia’s foreign holdings are 16 percent down on the same month in 2015 and are
at their lowest level since February 2012. The holdings peaked in August 2014
at US$737 billion falling with oil prices.
The
assets are likely to consist of US dollars, securities like US Treasury bonds
and deposits with banks abroad. The deposits reduced by US$8 billion to US$125
billion in July, but holdings in foreign securities grew by US$2 billion to US$371
billion after 10 straight months of contraction.
In
an attempt to corner the global market and oust high-cost oil producers like US
shale, Saudi-dominated OPEC introduced predatory prices for its oil, pushing
crude from US$114 a barrel in the summer of 2014 to the current US$50.
Last
year, the Saudi budget deficit hit an historic high of US$98 billion. Riyadh
expects this figure to drop to US$87 billion. To cover some part of the
deficit, the government has been borrowing domestically and abroad.
Despite
this, the Kingdom has no plans to cap production, pumping a record 10.67
million barrels of oil per day in July.
Saudi Arabia also expects to issue its first international bonds in October to raise at least US$10 billion. Citigroup, HSBC and JPMorgan Chase were hired as global coordinators for the sale, according to Bloomberg.
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