Oil futures decline on ample supply and strong dollar

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.