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Business News » World News

Oil falls from four-year highs; Saudi, Russia agree to up supply

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Updated: Thu, Oct 04, 2018
11:15 pm
Reuters
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Oil prices fell on Thursday as the prospect of increased crude production from Saudi Arabia and Russia prompted profit-taking the day after futures hit four-year highs on a boost from imminent U.S. sanctions on OPEC`s No. 3 producer Iran.

Price charts showed crude futures at technically overbought levels. The relative strength index (RSI) for both Brent and U.S. crude rose this week to above 70, a level often regarded as signaling a market that has risen too far.

"The market was a bit over-extended on a short-term basis," said Brian LaRose, senior technical analyst at ICAP-TA.

"I would need to see both $84.35 and $82.85 broken (for Brent) to suggest that something more than just a minor rest stop in an ongoing uptrend is likely to take place here."

Also weighing on oil prices, crude inventories at the U.S. hub of Cushing, Oklahoma, rose about 1.7 million barrels from Sept. 28 to Tuesday, traders said, citing a report from market intelligence firm Genscape.

Brent crude futures fell $1.32 to $84.97 a barrel, a 1.5 percent loss, by 1:10 p.m. EDT (1710 GMT), having risen to a late 2014 high of $86.74 on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures fell $1.71 to $74.70 a barrel, a 2.2 percent loss.

On Wednesday, Brent climbed to the most technically overbought level since February 2012, while WTI inched higher to the most overbought since January.

Sanctions on Iran kick in on Nov. 4. Saudi Energy Minister Khalid al-Falih said on Thursday the Organization of the Petroleum Exporting Countries was able to raise output by 1.3 million barrel per day, but offered no signal that the producer group would do so.

The kingdom plans to invest $20 billion to maintain and possibly expand its spare oil production capacity, and currently has a maximum sustainable capacity of 12 million bpd.

Reuters reported on Wednesday that Russia and Saudi Arabia struck a private deal in September to raise output. HIGH PRICES START TO WEIGH ON ECONOMIES, DEMAND

Rising oil prices and global trade worries are pressuring emerging economies, International Energy Agency Executive Director Fatih Birol told Reuters.

"There is concern that high prices may derail economic growth and harm oil demand," said Carsten Fritsch, senior commodities analyst at Commerzbank.

India faces an "economic crisis" due to its huge oil imports, two local TV channels cited Transport Minister Nitin Gadkari as saying. India also has been hurt by a slide in the rupee against the dollar.

Oil demand is showing signs of strain due to high prices and a strong dollar, which makes dollar-denominated oil more expensive for buyers using other currencies.

"We have argued recently that reaching the $100 market would be a tall order. We still maintain this view but sometimes it makes more sense to put a time rather than a price limit on a rally," PVM Oil Associates strategist Tamas Varga said.

"About the end of November, we will have a good idea as how many barrels will be lost due to the launch of the second round of the Iranian sanctions. By that time all the bullish news will be in the market."

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

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