LONDON: Brent crude oil steadied above $83 a barrel yesterday, consolidating after several months of sharp falls as US data pointed to stronger economic growth and as the dollar hit a four-year high.
US job growth increased at a brisk clip in October and unemployment fell to a six-year low of 5.8 percent, underscoring the US economy’s resilience in the face of slowing global demand.
The dollar reached its highest level since June 2010 against a basket of major currencies on yesterday. Brent was up 70 cents at $83.56 a barrel by 1445 GMT. The benchmark hit a four-year intra-day low of $81.63 on Wednesday, down from a high above $115 in June.
US crude was up $1.00 at $78.91 a barrel, having dropped from a high above $107 five months ago.
The US jobs figures carried mixed messages for oil.
The United States is the world’s biggest oil user and stronger growth there means more fuel demand. But a strong US economy also helps support the dollar, generally bad for oil.
A stronger dollar raises costs for holders of other currencies and tends to dampen demand for dollar-denominated commodities such as oil.
“It all speaks to the story that the US can sustain pretty strong growth,” said Jeff Greenberg, a senior economist at JP Morgan Private Bank in New York.
Increasing supplies of high quality crude oil from North American shale formations have weighed heavily on prices this year, creating a glut in world markets and decreasing demand for oil from the Organisation of the Petroleum Exporting Countries.
OPEC forecast on Thursday that its market share would be 5 percent smaller by 2018 as shale supplies continued to increase faster than demand.
But OPEC Secretary-General Abdullah al-Badri said the 12-member cartel, which pumps a third of the world’s oil, was not panicking and thought prices would recover next year.
“I think the price will rebound by the second half of next year. But I don’t know by how much. This situation of low prices cannot continue,” Badri said after announcing the publication of the group’s 2014 World Oil Outlook.
Opec ministers will meet in Vienna on November 27 to discuss how to react to falling oil prices and could decide to trim production. But many analysts think the scale of the oil market glut is so great that Opec may not be able to reduce output sufficiently to prop up prices.
Reuters
