Oil dropped more than 1 percent on Monday, with Brent slipping below $62 a barrel, depressed by a stronger dollar and a rise in Libya’s crude output.
The U.S. dollar strengthened to an 11-year high against a basket of currencies and outweighed potential support from monetary easing by Beijing to support the world’s second largest economy and biggest energy consumer. [FRX/]
“The U.S. dollar strength and euro weakness tend to offset any positive reaction that we’re supposed to see in oil prices,” said Ric Spooner, chief analyst at CMC Markets in Sydney.
Brent crude hit a low of $61.78 a barrel and was at $61.96 by 0301 ET, down 62 cents. Front-month prices jumped 18 percent in February, the largest monthly rise since May 2009. U.S. crude dropped 70 cents to $49.06 a barrel after rising 3 percent last month.
Some analysts said in a Reuters survey that oil prices have probably touched a bottom and should recover in the second half of 2015 as the collapse in the market over the last year begins to curb production.
Iraq’s oil minister, Adel Abdel Mehdi, said on Sunday he expected to see a barrel of crude selling at around $65.
Supply disruption among members of the Organization of the Petroleum Exporting Countries (OPEC) in February also supported Brent, stretching its premium over U.S. crude to the widest since January 2014 on Friday at $13 a barrel.
The spread held steady despite a recovery in Libya’s oil production to more than 400,000 barrels per day (bpd).
Still, technical charts pointed to a further widening of the spread to $16.98 in the next three months, Reuters market analyst Wang Tao said.
A rebound in prices in February may have slowed production cuts in the United States. The number of oil rigs fell 33 last week to 986, the smallest drop since the beginning of the year, a survey showed.
“While we expect Brent prices to recover eventually, with our 2016 forecast at $60/bbl, we do not expect a V shaped recovery from here,” Barclays analysts said in a note.
“Prices will have to move lower first, to create a meaningful impact on supply reductions, before the market balances in the first half of the year.”
Source: Reuters
