BusinessOil & Gas/Mining

Oil set for second weekly fall on firm dollar as supply worries ebb

Brent crude rose 39 cents, or 0.5%, to US$83.75 a barrel by 0624 GMT, while U.S. West Texas Intermediate crude was also up 39 cents, or 0.5%, at US$79.44 a barrel

Oil was headed for a second week of declines even as it rose on Friday, as the dollar firmed before a speech by Federal Reserve Chair Jerome Powell while concerns over tight supply eased.

Brent crude rose 39 cents, or 0.5%, to US$83.75 a barrel by 0624 GMT, while U.S. West Texas Intermediate crude was also up 39 cents, or 0.5%, at US$79.44 a barrel.

For the week, crude prices are set to fall between 1.2%-2.2%, a second consecutive week of decline.

“No doubt the Fed’s policy outlook will be the key driving force for markets ahead,” said Yeap Jun Rong, market analyst at IG.

“With fresh updates on U.S. inflation and labour market data after the previous FOMC meeting, focus will be on what factors the Fed Chair will have his attention on,” he said.

Investor caution ahead of Powell’s remarks at the Jackson Hole Symposium lifted the safe-haven dollar to a 10-week high, its biggest rise in a month, as markets waited for word on how long rates would stay elevated.

A strong dollar makes oil more expensive for holders of other currencies, denting demand.

On the supply side, talks between Turkey and Iraq’s semi-autonomous Kurdistan regional government on northern Iraqi crude oil exports are still going on after officials failed to reach an agreement to restart oil exports earlier this week.

Turkey stopped Iraqi oil flows via the Ceyhan port on March 25 after losing a long-standing arbitration case brought by Iraq.

The market is closely monitoring the flows of Iranian oil as the country’s crude oil output will reach 3.4 million bpd by the end of September, Iran’s oil minister was quoted as saying by state media, even though U.S. sanctions remain in place.

Further weighing on market sentiment, U.S. officials are drafting a proposal that would ease sanctions on Venezuela’s oil sector, allowing more companies and countries to import its crude oil.

Norway’s Equinor said on Friday it has started production at its extended Statfjord Ost field six months ahead of schedule and expects output to rise by 26 million barrels of oil equivalent.

“The support to oil prices from previous production cuts has ebbed. The market is looking for Saudi Arabia to continue extending its voluntary output reductions,” said analysts from Haitong Futures.

Analysts estimated that the top oil exporter will likely roll over a voluntary oil cut of 1 million barrels per day for a third consecutive month into October, amid uncertainty about supplies and as the kingdom targets drawing down global inventories further.

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