Oil steady after dollar sell-off, OPEC, China weigh

Dhaka,  Tue,  26 September 2017
Published : 15 Aug 2017, 21:10:20
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Oil steady after dollar sell-off, OPEC, China weigh

Traders expect Asia to import more Venezuelan crude if American sanctions kick in
LONDON, Aug 15 (Reuters): Oil prices steadied on Tuesday after a heavy sell-off following a surge in the dollar, and weighed down by signs of weaker demand in China, the world's second-largest consumer.

Benchmark Brent crude LCOc1 was unchanged at $50.73 a barrel by 0830 GMT. US light crude CLc1 was 5.0 cents lower at $47.54.

Chinese oil refineries operated in July at their slowest daily rates since September, official data showed. The drop was steeper than expected, raising concerns over the state of Chinese demand and level of domestic stocks.

Ample supply from big oil exporters, including members of the Organisation of the Petroleum Exporting Countries and the United States, also encouraged investors to sell long positions bought in July during a period of rising prices, analysts said.

Brent and US crude both reached two-month highs in early August but have fallen gradually in the last few days, with falls accelerating on Monday.

"The focus remains on OPEC, US inventories and disappointing China demand," said Hans van Cleef, senior energy economist at Dutch bank ABN Amro in Amsterdam. "Those concerns have triggered profit taking after a strong run-up in July."

The dollar rallied on Tuesday on an easing of the tensions around North Korea. A stronger dollar tends to limit demand for oil for buyers paying in other currencies.

The dollar index, which measures its strength against a basket of six major currencies, climbed 0.4 per cent on Monday and was up 0.3 per cent on Tuesday.

An announcement by the Nigerian subsidiary of Royal Dutch Shell that it had lifted a force majeure on Bonny Light crude exports also added to the market surplus.

US crude stockpiles likely fell for a seventh consecutive week, along with a probable fall in distillate and gasoline inventories, a preliminary Reuters poll showed.

The weekly US crude inventory report from industry group the American Petroleum Institute was due to be published later on Tuesday. Official US government statistics will be released on Wednesday.

Efforts by OPEC and other producers to limit output have helped lift Brent past $50 a barrel, but production elsewhere, particularly in the United States, has undermined prices.

US shale oil production is expected to grow for a ninth consecutive month in September to 6.15 million barrels per day, the US Energy Information Administration said on Monday.

Reports from Singapore and Houston add: Asia would be the biggest beneficiary of any potential sanctions by the United States (US) on Venezuela's oil sector, said traders and analysts, as exports from the South American OPEC member could be redirected to the region, filling a vacuum left by producer supply cuts.

Washington is considering sanctions on Venezuela's oil industry in response to the ruling Socialist Party's crackdown on officials and parties opposed to the government. An embargo against Venezuelan crude could block imports of about 740,000 barrels per day to the US

Asian refiners would welcome the so-called heavy, or higher density, crude since production cuts by the Organisation of Petroleum Exporting Countries (OPEC) have mainly curtailed this type of oil. At the same time, the start-up of new refining capacity is boosting demand.

China and India, the two biggest buyers of Venezuelan crude after the United States, have room to increase imports while other north Asian refiners, with equipment sophisticated enough to handle heavy Venezuelan oil, are seeking opportunities to tap this supply, analysts and traders said.

"Whatever oil that the United States doesn't want will find its way into the global market," a trader with a north Asian refiner said, adding that Venezuelan oil could be a good fit for the company's plant.

A trader with another north Asian refiner said he is also looking for opportunities to import Venezuelan crude if the US imposes sanctions. The sources spoke on the condition of anonymity because they were not authorised to speak to media.
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