Oil Falls to $55 as Saudis Keep Pumping

Oil prices declined on Monday, holding near $55 a barrel after Saudi Arabia indicated it was now pumping near a record high of 10 million barrels per day, adding to concerns of global oversupply.

Saudi Arabia has stood firm on output, saying it would only consider cutting it if other producers outside OPEC also joined.

Brent crude oil futures were trading down 21 cents at $55.11 a barrel at 1217 GMT, after hitting a low of $54.12. U.S. WTI crude was down 55 cents at $46.02.

Saudi oil minister Ali al Naimi also said the kingdom was now pumping around 10 million barrels per day (bpd), which could indicate an increase of 350,000 bpd over its February production.

Analysts at Barclays forecast on Monday that if OPEC production held near current levels of near 30 million bpd, the market surplus would expand from 900,000 bpd to 1.3 million bpd.

Oil prices have see-sawed, weighed down by concerns of oversupply but boosted by swings in the strength of U.S. dollar ahead of the expected end of years of zero interest rate policy in the United States later this year.

On Monday, oil prices pared some of their earlier losses after the dollar renewed its slide.

“In the past 15 years, the global economy was defined by rising commodity prices, zero interest rate policy, and a weak USD. This cycle has now gone into reverse with a decelerating industrial economy in China and the rise of U.S. shale,” Bank of America Merrill Lynch said in a report.

“A combination of a strong dollar, higher interest rates and subdued growth may keep commodity prices in check in 2015,” it added.

China’s February crude oil imports from Iran fell 3.7 percent from a year ago to 2.04 million tonnes. China boosted overall imports late last year, taking advantage of cheap oil to build its reserves, but storage tanks could be reaching their limits, forcing a slowdown in orders.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell