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Oil Prices Rise with Weaker Greenback

Oil Prices Rise with Weaker Greenback thumbnail

Oil closed higher as a weaker dollar offset an OPEC+ committee’s decision to hold off on offering a recommendation on whether a planned production hike should move forward.

Futures rose 0.2% in rose in New York in an afternoon rally after falling as much as 1.9% earlier in Tuesday’s session. The Bloomberg Dollar Spot Index fell as much as 0.3%, boosting the appeal for commodities priced in the currency. Meanwhile, West Texas Intermediate December options expired Tuesday, with $42 call options the most-active.

Prices weakened earlier after an OPEC+ committee meeting ended without a concrete signal that producers will reverse plans to increase output come January. The producer group had been discussing postponing an output increase by three to six months. Yet, Saudi Energy Minister Prince Abdulaziz bin Salman said the market is too fluid to make a decision on the cuts now.

“The combination of option expiration in WTI and short-covering in Brent were key drivers behind today’s late day oil rally,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “Last week’s vaccine news and subsequent oil rally forced CTA’s to begin covering this outsized position as the spot contract rallied above many key moving averages.”

West Texas Intermediate crude futures are trading above the 50-day, 100-day and 200-day moving averages.

The OPEC+ alliance is wrestling with a bifurcated demand outlook. In Asia, where consumption has recovered substantially from Covid-19, refiners have been snapping up barrels from the Middle East, U.S. and Russia. The structure of Oman futures on the Dubai Mercantile Exchange has surged into a bullish backwardation — indicating tight supplies — in recent days. Yet, in Europe and the U.S., a surge in coronavirus cases has led to tougher restrictions limiting movement and consumption.

“There’s still a question of how much demand growth there’ll be,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “This is a meaningful near-term problem given still abundant supply and no real evidence of an uptick in global demand growth yet.”

Prices

  • West Texas Intermediate for December delivery gained 9 cents to settle at $41.43 a barrel
  • Brent for January settlement fell 7 cents to end the session at $43.75 a barrel

OPEC+ producers are trying to avoid oversupplying the market at a time when ministers have voiced both optimistic and cautious notes on the strength of global demand. Prince Abdulaziz said vaccine developments provide a light at the end of the tunnel, but the market has some way to go before getting there.

The producer group has been dropping hints for weeks that its plan to add almost 2 million barrels a day to oil markets next year may not be such a good idea as demand remains depressed.

Meanwhile, in the U.S., there are expectations for a second straight weekly build in crude stockpiles. The industry-funded American Petroleum Institute will report its figures later Tuesday ahead of a U.S. government tally on Wednesday.

Other oil-market news:

  • Saudi Aramco launched a jumbo bond sale on Tuesday to help fund a $75 billion dividend, returning to the debt markets for the first time since April of last year.
  • Chevron Corp. and top American oil-service providers won more time to wind down operations in Venezuela under the sanctions imposed by U.S. President Donald Trump on Nicolas Maduro’s regime.
  • Exxon Mobil Corp. suffered a rare exploration miss in Guyana after its latest well came up short of previous discoveries.
  • The organization responsible for setting global environmental standards for shipping approved rules designed to curb the industry’s carbon emissions, triggering criticism that its measures won’t do enough to help tackle climate change.

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2 Comments on "Oil Prices Rise with Weaker Greenback"

  1. makati1 on Wed, 18th Nov 2020 3:00 pm 

    The USD is getting weaker and weaker by the day. The foreign exchange rate keeps slipping by a few points every few days. A few little ups, but mostly down.

    In February, the Dollar to Peso rate was 51.80 Pesos to the Dollar. Now, it is 48.2. A drop of about 7% in about 7 months. A weak Dollar is not good for Amerikans.

    But, let’s see how Limbo Low it can go as the US continues to collapse.

    BTW: It dropped to 40.6 in the last crash. Grew thru most of Trump’s term and is now collapsing again as the chaos in Amerika is scaring the investors East.

    Pass the popcorn. The show is getting interesting, in a Chinese way.

  2. Abraham van Helsing on Fri, 20th Nov 2020 8:12 am 

    “Euro beats US dollar as world’s most used currency, SWIFT says”

    https://www.rt.com/business/507263-euro-beats-dollar-globally/

    The US dollar has lost to the euro as the number one currency for global transactions for the first time in nearly eight years, said the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
    According to Bloomberg citing monthly SWIFT data, the last time the euro was in the number one spot was February 2013.

    Data from SWIFT, which handles cross-border international payments for more than 11,000 financial institutions in 200 countries, showed the European Union’s single currency was the most used one last month. It was followed by the greenback, then the British pound, and the Japanese yen. In the fifth spot was the Canadian dollar, which has moved China’s yuan to sixth place.

    Statistics showed that 37.8 percent of the SWIFT cash transfers were completed in euros in October, rising six percent from about a year ago and marking the highest level since February 2013. The use of the US dollar dropped to 37.64 percent, down 4.6 percentage points.

    The US currency has weakened more than 11 percent from its March peak, based on a Bloomberg index that measures it against a basket of major peers. Analysts are predicting its valuation to drop further.

    Still, the Bank of International Settlements (BIS) said in its June report that the US dollar remained a dominant force in international finance. According to BIS, “around 85 percent of all foreign exchange transactions occur against the US dollar. It is the world’s primary reserve currency, accounting for 61 percent of official foreign exchange reserves.”

    The latter is a result of decades of dollar money creation. That dollar-euro 60-20 ratio will only change after a major geopolitical upheaval (CW2 and/or WW3). Won’t be long.

    P.S.: fascinating that the Canadian dollar has replaced the Chinese Yuan at #5. The Chinese currency is not adopted outside of China, apart from in Russia in limited amounts. Russia wants to be part of the Euro area instead.

    https://econbrowser.com/archives/2007/11/the_euro_as_the_1

    “The Euro as the World’s Reserve Currency: A Progress Report”

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