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Home / Futures Blog / Oil futures decline on ample supply and strong dollar

Oil futures decline on ample supply and strong dollar

September 19, 2014 by Daniels Trading

On Friday crude oil futures fell slightly amid ample supplies across the globe and as a strengthening dollar capped prices. The price of Brent crude oil has also declined throughout the past three months as a result of rising supplies from the U.S., West Africa and Libya, outpacing demand.

West Texas Intermediate crude traded lower as expectations that the Federal Reserve is likely to increase interest rates offset signs of reduced production from the Organization of Petroleum Exporting Countries. 

The dollar firms
In electronic trading on the New York Mercantile Exchange WTI for October delivery declined near 73 cents to $92.34 and traded at $92.86 this morning. Prices are 0.8 percent higher this week following a decline of 3.8 percent during the first two weeks of this month. The volume of all futures traded was around 5.8 percent under the 100-day average for the time of day, reports Bloomberg.

According to The Wall Street Journal because the commodity is dollar dominated, a stronger dollar increases the price of oil for holders using other currencies to buy. The result of the Scottish referendum, in which Scotland's voters chose to continue to be a part of the U.K., may possibly lead to a "much-needed capital injections to some of the smaller cap North Sea oil and gas explorers will move a step closer—via mergers and acquisitions or capital raising on the public markets" said Ian McLelland, oil and gas analyst at Edison Investment Research.

Meanwhile, in the recent meeting, Fed officials rose their median estimate for the federal funds rate to 1.375 percent at the end of next year, compared to June's forecast for 1.125 percent. The dollar gained 0.1 percent to 108.81 yen in London, after reaching the highest level since 2008 at 109.46 earlier, reports Bloomberg.

Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark, said by e-mail to Bloomberg, "The Fed succeeded in not spooking the markets with a rate hike here and now, all the while raising projected interest rate paths. Despite dwindling Libya oil output, the world still seems well-supplied with oil."

On London's ICE Futures November Brent crude exchange fell 0.2 percent at $97.70 a barrel, according to The Wall Street Journal. The U.S. November contract was at $5.86 to Brent, a discount for the same month on ICE, versus $5.72 yesterday, reports Bloomberg. 

Supply exceeds demand
For the first time this year, U.S. crude supplies have reached the highest level since 2012 as the shale boom accelerates production. Throughout the week ended Sept. 12 output climbed by 248,000 barrels a day to 8.838 million. According to the Energy Information Administration, this is the most since March 1986, reports Bloomberg. 

Nic Brown, head of commodities research at Natixis, told The Wall Street Journal that this week's comments from the Organization of the Petroleum Exporting Countries suggested that it could lower oil production, which is a supportive factor to short-term prices.

OPEC Secretary-General Abdalla Salem el-Badri said that he forecasts that at its meeting in November, the group will reduce its production target from 30 million barrels a day to 29.5 million barrels a day. 

Jens Naervig Pedersen, an economist at Danske Bank A/S in Copenhagen, said by e-mail to Bloomberg, "We are at the bottom now and we expect prices to remain stable around this level the coming year. Prices have gained some support from the comments from OPEC earlier this week hinting that it may lower its production target for next year."

In other energy markets, ICE gas oil for October delivery remained flat from Thursday's close, settling at $823.75 a metric ton, reports The Wall Street Journal.

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

Filed Under: Archived News

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Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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