Oil prices decreased by almost two percent on Monday, putting an end to two straight days of gains, on concerns over galloping Middle East crude output as well as a stronger dollar increased by chances of a United States interest rate hike by the end of 2016. Iraq, which has exported more crude from its southern ports in August, will continue ramping up output, its oil minister said on Saturday. Top exporter Saudi Arabia has kept output at around record levels this month.
The dollar reached a three-week high against the yen once Federal Reserve Chair Janet Yellen increased expectations in a speech on Friday that the central bank would increase interest rates in the not so distant future. A more robust dollar makes commodities denominated in the greenback more expensive for holders of other currencies. Focus on increasing Middle East production as well as the strengthening dollar also offset data from energy monitoring service Genscape indicating a drawdown of 287,444 barrels at the Cushing, Oklahoma delivery point for U.S. crude futures during the week that ended August 26th, traders who saw its report stated.
Brent crude LCOc1 had decreased 77 cents, or 1.5 percent, to $49.15 a barrel by 11:15 a.m. EDT (1515 GMT), almost completely ridding gains from the last two sessions. U.S. West Texas Intermediate (WTI) crude futures CLc1 decreased 80 cents, or 1.7 percent, to $46.84 a barrel after falling more than $1 at the session low. Oil increased with just a bit of stops from early August until mid last week after hints by Saudi Arabia and fellow members of the Organization of the Petroleum Exporting Countries that they may agree to an output freeze with non-OPEC oil producers at a meeting in Algeria on Sept. 26-28.
“The market is increasingly likely to discount the outcome of the event, given, even in the instance of a freeze being agreed, compliance will be an issue,” Barclays stated in a report.