Oil Prices Eases, Gears For Best Month

Jon Howard
January 31, 2018

The rise in both crude and product inventories is to be expected ahead of scheduled refinery maintenance planned for February and March, said Michael Poulsen, a senior oil risk manager at Global Risk Management.

The problematic dollar continues to push commodities prices higher as investor looks for something as the currency continues to drop. Meanwhile, the greenback is recovering from the lowest level in three years as Treasuries extend their selloff at the start of a pivotal week of data and events. "Rising U.S. bond yields caused dollar shorts cover and as a result oil prices fell".

All eyes are especially focused on the U.S. output, as the American Petroleum Institute will post its data Tuesday and the U.S. Energy Information Administration publishes its official figures on Wednesday; for the time being, a Reuters poll reveals that analysts believe crude supplies will rise for the first time in 10 weeks. The trend in US production will be a key focus for markets, he said.

West Texas Intermediate crude futures finished Monday's session down 58 cents, or almost 1%, at $65.43 a barrel, while Brent crude futures were down $1.21, or 1.7%, to $69.31/Bbl by 2:23 p.m. ET. Total volume traded was about 13% above the 100-day average.

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Crude prices also had drawn support from a large premium in the front-month Brent oil contract over those for future delivery, as investment in crude futures and options reached a new record high last week.

On a trade weighted basis, the USA dollar remained subdued, but against both the euro and the yen - two of the world's biggest oil importers - the dollar has gained about 4% during the past three weeks.

Brent for March settlement dropped 83 cents to $69.69 on the London-based ICE Futures Europe exchange. Stockpiles fell to 411.6 million barrels through the week ended January 19, the lowest level since February 2015. Only Russia produces more, averaging 10.98 million barrels per day (bpd) in 2017. By week's end, traders will have absorbed U.S. President Donald Trump's State of the Union address, Janet Yellen's final meeting as Federal Reserve chair, details on the Treasury's plan to cover wider deficits, and the latest read on the U.S. job market.

German import price inflation in December was the lowest in over a year, though prices rose during the whole year 2017, erasing the decline seen in the previous year, preliminary data from the statistical office Destatis showed Monday. The Bloomberg Dollar Spot Index was up 0.2 percent after jumping 0.3 percent Monday.

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