Oil Prices Lose Steam; OPEC Meeting in Focus for Cues
29 August 2016 - 4:09AM
Dow Jones News
By Jenny W. Hsu
Crude prices fell in early morning trade in Asia on Monday, as
investors locked in their profits on growing signals that the U.S.
Federal Reserve could raise interest rates as early as next
month.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in October traded at $47.11 a barrel at 0120 GMT, down
$0.53 in the Globex electronic session. October Brent crude on
London's ICE Futures exchange fell $0.47 to $49.45 a barrel.
Oil prices were choppy as Federal Reserve Chairwoman Janet
Yellen signaled growing conviction that the central bank will raise
short-term interest rates in the weeks or months ahead.
A rise in U.S. interest rates usually does not bode well for oil
prices which are priced in the greenback. Higher interest rates
could push the dollar higher, making oil products more expensive
for oil traders who hold a different currency. The WSJ Dollar Index
was largely steady after rising 0.8% over the weekend.
A key driver for the oil markets in the coming weeks would be
any new rhetoric from members of the Organization of the Petroleum
Exporting Countries, who are slated to have an informal meeting
next month to discuss the oil markets.
"The market will be in a wait-and-see mode until the meeting,
even though the general expectation is that OPEC will do a lot of
talking but not much doing," said Aaron Lynch, an energy analyst at
OptionsXpress.
The low expectation from OPEC is mostly a result of several
failed attempts in the past when the group couldn't come to an
agreement on how to stimulate the prices.
When prices dropped to a 13-year low in February, four oil
majors, including Saudi Arabia, floated the idea of a production
freeze. However, the suggestion never came to fruition because Iran
refused to go along with a production limit. Iran's rejection
prompted Saudi Arabia to back out of the deal at the last
minute.
Analysts say even though prices are still in the doldrums
compared with the above-$100 level seen in mid 2014, the steady
uptrend seen in the past few months could give Saudi Arabia more
justification to leave prices alone, dousing any possibility of a
production freeze.
"An agreement seems some way off, if not impossible," said
Stuart Ive, a client manager at OM Financial.
Nymex reformulated gasoline blendstock for September--the
benchmark gasoline contract--fell 143 points to $1.4985 a gallon,
while September diesel traded at $1.4928, 44 points lower.
ICE gasoil for September changed hands at $435.25 a metric ton,
down $2.50 from Friday's settlement.
-Write to Jenny Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
August 28, 2016 22:54 ET (02:54 GMT)
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