Oil Drops as OPEC Cuts Demand Forecast

Crude futures slid for a fifth time in six days after OPEC cut forecasts for the amount of oil it needs to supply and the dollar strengthened.

West Texas Intermediate fell as much as 1.6 percent in New York while Brent retreated as much as 1 percent in London. OPEC lowered every published forecast for its crude demand through 2035 except next year. Oil also dropped as Libya said it will resume pumping crude “soon” at its biggest oil field. The euro weakened against the dollar as European Central Bank President Mario Draghi deepened his commitment to stimulus.

“Demand is down and supply is up, we are in a situation where we will continue to go lower,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The stronger dollar is weighing on the market. We are selling any rallies that we get, which has been a good trade.”

WTI for December delivery slid $1.03, or 1.3 percent, to $77.65 a barrel at 9:13 a.m. on the New York Mercantile Exchange. The contract climbed $1.49 to $78.68 a barrel yesterday. The volume of all futures traded was about 19 percent above the 100-day average for the time of day.

Brent for December settlement declined 51 cents, or 0.6 percent, to $82.44 a barrel on the London-based ICE Futures Europe exchange. Volume was 7.9 percent above the 100-day average. The European benchmark crude traded at a $4.78 premium to WTI. The spread closed at $4.27 yesterday, the narrowest since Oct. 22.

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza