Oil reacts to sanctions against Russia
Oil prices dropped on Friday and are set for a third consecutive monthly decline, as a stronger dollar, weak data from China and increased global supply have offset the impact of Western sanctions on Russian exports.
Source: Reuters
Details: Brent crude futures fell by US$0.12, or 0.18%, to US$64.88 per barrel by 07:44 GMT, while West Texas Intermediate (WTI) crude dropped by US$0.21, or 0.35%, to US$60.36 per barrel.
Analysts at ANZ said in a note to clients that the strengthening of the US dollar had dampened investor interest in commodities.
The dollar strengthened after US Federal Reserve Chair Jerome Powell said on Wednesday that a December interest rate cut was not guaranteed.
Oil also declined in price following an official survey showing China's manufacturing activity contracted for a seventh consecutive month in October.
Brent and WTI prices are set to fall by approximately 3% in October, with supply growth outpacing demand amid rising output by both OPEC and non-OPEC producers seeking greater market share.
This increased supply is also expected to mitigate the effect of Western sanctions on Russia's oil exports to major buyers like China and India.
OPEC+ is leaning towards a moderate output increase in December, sources familiar with the discussions said ahead of the group's meeting on Sunday.
Eight OPEC+ members have raised production targets by over 2.7 million barrels per day – around 2.5% of global supply – through a series of monthly increases.
Meanwhile, Saudi Arabia, the world's largest oil exporter, raised exports in August to a six-month high of 6.407 million barrels per day, according to Joint Organizations Data Initiative figures published on Wednesday, and further growth is expected.
A report by the US Energy Information Administration also showed record production of 13.6 million barrels per day last week.
US President Donald Trump said on Thursday that China had agreed to begin purchasing US energy, adding that a major deal related to buying oil and gas from Alaska might take place.
However, analysts remain sceptical that a US-China trade deal would significantly boost Chinese demand for US energy.
"Alaska produces only 3% of total US crude oil output (not significant), and we think Chinese purchases of Alaskan LNG likely would be market driven," Barclays analyst Michael McLean wrote in a note.
Background: Oil prices also fell on Thursday 30 October, despite US President Donald Trump's remarks that he would lower tariffs on China following his meeting with Xi Jinping in South Korea. The market remained sceptical about this signalling the end of the trade war.
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