Crude prices eased on Thursday morning after the U.S. Federal Reserve raised interest rates and as higher-than-expected output from Organization of Petroleum Exporting Countries also prompted sell-offs.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January CLF7, -0.06% traded at $50.97 a barrel, down $0.07 in the Globex electronic session. February Brent crude LCOG7, +0.19% on London’s ICE Futures exchange rose $0.05 to $53.95 a barrel.
On Wednesday, the U.S. Federal Reserve raised interest rates for the first time in a year, putting pressure on commodities markets.
A rise in U.S. interest rates strengthens the greenback, the main currency used in oil trading, making oil more expensive for traders using other currencies. The dollar was last up 15 cents or 0.16% at $92.51, according to the WSJ Dollar IndexBUXX, +0.32% which tracks the dollar against 16 currencies.
“The move by the Fed to hike rates is likely to keep downward pressure on prices during today’s session,” said ANZ Research.
OPEC’s latest monthly report added more pressure, showing that the group increased its output by about 150,000 barrels a day in November to 33.87 million barrels a day. In order to reach the goal agreed Nov. 30 to cap the group’s production at 32.5 million barrels a day, the group will have to cut 1.37 million barrels, more than the 1.2 million barrels originally envisioned, making it harder for the group to make good on its promises, said Capital Economics in a note.
The firm also pointed out downside risk from the possibility of increased output from Nigeria and Libya, who were exempt from this round of cuts as their production has been blunted by civil strife. If their production rises, the rest of the group would need to cut more, it said.
The cartel forecasts demand for OPEC crude in 2017 would hit 32.6 million barrels a day. It also predicts an acceleration in the reduction of global inventories, if non-OPEC nations live up to their pledges of cutting production by 558,000 barrels a day.
For 2017, non-OPEC oil production is expected to grow by 300,000 barrels a day, pushed up by Brazil, Kazakhstan, and Canada, while production from strong producers like Mexico, China, and the U.S. is likely to slip, the cartel reported.
One data point that is offsetting the negative news is the surprise 2.6 million barrel decrease in U.S. crude stockpiles for the week ended Dec. 9, more than the average forecast of 1.7 million barrels from analysts and traders surveyed by the Wall Street Journal.
Nymex reformulated gasoline blendstock for January RBF7, +0.61% — the benchmark gasoline contract — rose 57 points to $1.5388 a gallon, while January diesel traded at $1.6452, 17 points higher.
ICE gasoil for January changed hands at $480.00 a metric ton, down $8.25 from Wednesday’s settlement.