Oil prices down in world market

By Azernews

By Nigar Abbasova

World oil prices continued to decline on October 17, negatively affected by the data on an increased number of drilling rigs in the United States, strong greenback and record level of OPEC-output.

International Brent crude futures dipped 8 cents to stand at $51.87 per barrel, while U.S. West Texas Intermediate (WTI) crude traded at $50.20 per barrel, recording a decrease of 15 cents from the last settlement.

Baker Hughes Rig Counts data became one of the main reasons of the drop, indicating more production ahead and strengthening concerns about supply glut.  

The data  reflected another rise in U.S. oil drilling activity, recording a rise by 4 rigs up to 432, while the total active U.S. rig count, which comprises oil and natural-gas rigs, climbed by 15 to 539. An increase became the 16th in a row that oil drillers had gone without making cuts.

 Such indices strengthen expectations of traders on the possible increase of production in the U.S., further complicating the reach of balance in the market.

A seven-month high of the dollar against a basket of other leading currencies is another factor pushing oil prices back.  The USD is considered to be one of the biggest factors that determine the oil price, as oil contracts are settled in this currency. Dollar-denominated oil futures, record a fall in price should the currency strengthens, as prices increase for purchases that use other currencies.  The strengthening of the currency came on the back of an expected hike in U.S. interest rates later this year.

Moreover, oil price was also influenced by fresh production records from OPEC, which pumped out a record 33.6 million barrels of crude oil per day in September.  The new data, meanwhile, became an additional indication for investors that to finalize cartel’s decision to cut production would be difficult.  

The focus is still on OPEC’s next meeting in Vienna, where the group to finalize details, deciding on how much each of its 14 members can pump, and convince oil producers outside the group to join the deal.

A global glut of oil supply caused oil prices to crash over the past two years, as the world's biggest oil producers refused to cut production in order to defend their market share. Doubts about how much the deal would reduce a crude glut, as well as demand of some countries to be treated as an exception remain among main concerns for traders.  

Iran's deputy oil minister said the OPEC's agreement to limit oil output at 32.5 million barrels per day was a small step but in right direction, adding that Iran's current oil output is 3.85 million bpd, and its exports more than 2.2 million bpd.

Russian Energy Minister Alexander Novak, in turn, said that the country jointly with energy companies will develop mechanisms on the preservation of the output volume at the same level.