Oil Falls as Dollar Rally Outweighs Saudi Optimism on OPEC Deal

  • U.S. currency rises to 9-month high against peers on Yellen
  • Algeria says group near consensus on six-month output deal

Iran, Iraq to Miss OPEC Doha Talks

Oil fell as the dollar rallied to a nine-month high against its peers after Federal Reserve Chair Janet Yellen signaled the U.S. central bank is close to raising interest rates.

Futures slipped 0.3 percent in New York after earlier rising as much as 2.2 percent. Prices retreated as the greenback rose, making commodities priced in the currency less appealing to investors. Saudi Minister of Energy and Industry Khalid Al-Falih told Al Arabiya television he’s “optimistic” that OPEC will reach a deal to cut output and said that a production ceiling of 32.5 million barrels a day would speed the balancing of the market.

"The only thing that’s changed from earlier today is that the dollar is stronger," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "The rising dollar appears to be triggering selling of commodities."

Since reaching a 2016 high last month, crude has retreated amid doubts about the ability of OPEC to implement a deal at its Nov. 30 meeting in Vienna. The group is seeking to trim output for the first time in eight years, a plan complicated by Iran’s commitment to boost production and Iraq’s contention that it should be exempt so it can fund its war with Islamic militants. Neither country will send a minister to Doha. The producer meeting comes after U.S. crude stockpiles rose for a third week, according to a government report.

West Texas Intermediate for December delivery declined 15 cents to close at $45.42 a barrel at the close on the New York Mercantile Exchange. Prices slipped 1.2 percent to $45.01 at 2:56 p.m.

Brent for January settlement fell 14 cents to $46.49 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a 51 cent premium to January WTI.

Yellen Comments

The dollar surged after Yellen said the U.S. central bank is close to lifting interest rates as the economy continues to strengthen. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose as much as 0.6 percent to the highest level since February.

"Optimistic statements from energy ministers tend to be supportive for a very short time," Evans said. "The Russian energy Minister Alexander Novak spoke of his optimism yesterday and we briefly rose and today Saudi Arabian Energy Minister Khalid Al-Falih said the same. At some point the market wants to see the cut itself."

OPEC members are meeting this month to finalize an agreement to rein in oversupply and buoy prices. They agreed initially in September in Algiers to cut their collective output to 32.5 million to 33 million barrels a day.

Meanwhile, there is consensus within OPEC for a production limit lasting “six months, maybe a year, with a revision after six months,” Algerian Energy Minister Noureddine Boutarfa told reporters.

"The Nigerian, Iranian and Iraqi oil ministers are absent from the Doha talks, but you do have the world’s two biggest producers, Saudi Arabia and Russia," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "We can expect supportive statements coming from the talks today and tomorrow."

Oil-market news:

  • U.S. crude stockpiles increased by 5.27 million barrels to 490.3 million barrels last week, according to a report Wednesday from the Energy Information Administration.
  • Tesoro Corp. agreed to buy Western Refining Inc. for about $4.1 billion in a deal that positions the oil refiner to take advantage of crude production growth in the prolific Permian Basin.
  • Russia’s decision earlier this year to engage in talks with OPEC about limiting oil output has added more than 400 billion rubles ($6 billion) to the nation’s budget by lifting prices, according to two officials familiar with government.
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