Oil Falls as Speculators Cool on Crude, US Drillers Add Rigs

 

Brent crude futures were down 60 cents at $47.41 a barrel by 1352 GMT, having recovered from a session low of $46.90, while U.S. crude rose from an intraday low of $44.72 to trade at $45.23, down 65 cents.

 

Traders said the price falls on Monday and Friday were a result of increasing drilling in the United States, which indicated that producers can operate profitably around current levels.

 

"The idea that we will continue to bounce off the $50 per barrel handle is proving correct," said Matt Stanley, fuel broker at Freight Investor Services (FIS) in Dubai, pointing towards "the dynamic of shale oil" as the main reason prices have been pulled back down.

 

Oil's decline of nearly 6 percent since Sept. 8 partly reverses a 10 percent rally early in the month to about $50 a barrel.

 

Adding to the pressure on oil, the dollar rose against its Australian counterpart and most emerging market currencies as investors priced in a greater chance of U.S. interest rates rising next week, which forced up bond yields and dented the broader commodities complex.

 

"From that perspective, we're getting a bit of a sell-off in oil," CMC Markets strategist Jasper Lawler said.

 

"Given the good run that oil has had, that was maybe the easy trade to take when the dollar was rallying."

 

When the dollar strengthens, non-U.S. investors tend to cash in on dollar-denominated assets such as crude oil.

 

This correlation was at its most negative in more than a month on Monday, meaning the two are more likely to move inversely to one another than at any time since early August.

 

OPEC on Monday estimated oil output from its non-cartel rivals would grow more quickly next year than originally estimated, pointing to a larger surplus than previously forecast.

 

A number of key members of the producer group, including Saudi Arabia, have hinted that they may be willing to consider freezing output, though there is no certainty that a deal could materialise any time soon.

 

Speculators last week made the biggest cut in more than a year to bets that the price of oil will rise and reduced bullish holdings of gasoil futures by nearly half, data from the InterContinental Exchange showed on Monday.