By Timothy Puko And Georgi Kantchev
Oil prices fell Friday, pressured by a stronger dollar and
growing pessimism that the global oversupply of crude remains
strong.
January crude closed down $1.33, or 3.1%, to $41.71 a barrel on
the New York Mercantile Exchange. Brent, the global benchmark, fell
60 cents, or 1.3%, to $44.86 a barrel on ICE Futures Europe.
The dollar strengthened Friday and pressured commodities such as
oil, which are priced in the U.S. currency. The Wall Street Journal
Dollar Index, which tracks the dollar against a basket of other
currencies, rose 0.3% Friday.
But brokers and analysts also see fading demand growth, a
troubling sign for prices in a world where production and
stockpiles are still high.
Gasoline merely matches demand at this time last year, and
distillate demand is lower, said Donald Morton, senior vice
president at Herbert J. Sims & Co., but stockpiles are still
filling up with new production.
"This oil market is just not tightening," Wolfe Research
analysts said in a note Friday. "Nothing really bullish is out
there."
The Wolfe analysts said they are concerned their bearish
forecast for U.S. oil at $58 a barrel in 2016 is too high.
Bankruptcies and major cuts to supply are not happening fast enough
to turn the oil markets around, they said.
News from the Organization of the Petroleum Exporting Countries
is not helping either. News agencies reported Friday that Russia
will not send high-ranking officials to OPEC's coming meeting,
adding to Friday's selloff, Mr. Morton said. Without cooperation
from other major exporters, OPEC is unlikely to curtail its own
strong production, which would be another factor perpetuating the
oversupply.
"The market took it hard," he added.
Friday's losses took U.S. oil into negative territory for the
week, down 19 cents, or 0.5%. It is its sixth losing week in the
past seven. Brent, however, did gain, up 20 cents, or 0.4% for the
week.
Those gains came largely from geopolitical tensions, after
Turkey shot down a Russian jet along the Syrian border, causing a
rally to start the week. But there is little indication so far the
turmoil in the Middle East is affecting oil supply.
"The potential increase in geopolitical risk premium has faded a
bit as the dispute between Russia and Turkey has not yet escalated
or spread to the surrounding countries, affecting oil output," said
Michael Poulsen, oil analyst at Global Risk Management.
Oil prices headed south last year after OPEC embarked on a
strategy of protecting its market share by pumping more crude
despite falling prices. While the booming U.S. output has tailed
off this year, oil stockpiles remain near record highs.
"Inventory overhangs dominate the oil markets and will likely
suppress oil prices in the near term, as we approach [the December]
OPEC meeting in Vienna," said Jason Gammel, analyst at
Jefferies.
"Crude and product inventories are building in the U.S. with the
market expected to remain oversupplied through the first half of
2016," he said.
Earlier this week, the U.S. Energy Department said crude
stockpiles ticked up by 1 million barrels last week, bringing the
total tally to 488.2 million barrels, around a level not seen in
the last eight decades. U.S. oil output has also held stable,
around 9.2 million barrels a day, but down from a peak of 9.6
million barrels a day in April.
"Oil market oversupply will continue through next year, due to
resilient U.S. production, even if it is declining, and high OPEC
output led by Saudi Arabia and Iraq," said Michael Wittner, chief
oil analyst at Société Générale.
Mr. Wittner said he doesn't believe there will be "any change in
Saudi or OPEC policy," when the 12-nation oil cartel meets in
December.
Gasoline futures settled down 0.23 cent, or 0.2%, at $1.3938 a
gallon. They rose 10.35 cents, or 8%, for the week, its largest
one-week gain since April and largest one-week percentage gain
since September 2012.
Diesel futures lost 5.03 cents, or 3.6%, to $1.3524 a gallon,
the lowest price since April 30, 2009. Diesel is down for four
straight weeks, losing 1.89 cents, or 1.4% this week.
Jenny W. Hsu contributed to this article.
Write to Timothy Puko at tim.puko@wsj.com and Georgi Kantchev at
georgi.kantchev@wsj.com
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(END) Dow Jones Newswires
November 27, 2015 14:48 ET (19:48 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.