Oil prices fell early on Friday and were headed for a third consecutive week of losses, as the U.S. dollar strengthened and the market continues to guess whether the Biden Administration will act now to try to bring down high gasoline prices.
As of 9:55 a.m. EST, WTI Crude was trading down 1.21% at $80.60 and Brent Crude had fallen by 0.93% to $82.10.
Oil prices were weighed down by a rise in the U.S. dollar as some investors now see the Fed raising interest rates as early as next year to tame inflation. A stronger greenback makes oil buying more expensive for holders of other currencies.
In addition, market participants are weighing the possibility of the U.S. Administration acting now to seek to reduce the highest gasoline prices in America in seven years, with a release from the Strategic Petroleum Reserve (SPR) cited by analysts as the most likely option.
On Thursday, OPEC cut its oil demand forecast for 2021, for a second month running, acknowledging that “a slowdown in the pace of recovery in 4Q21 is now assumed due to elevated energy prices,” on top of weaker than expected Q3 demand from China and India.
On Thursday, oil prices were supported in part by a shutdown of the giant 535,000-barrel-per-day Johan Sverdrup oilfield offshore Norway after a power outage. Production was fully restored by Friday, the field’s operator Equinor said today.
Analysts are also warning of the oil market balance tipping into surplus early next year.
“Assuming OPEC+ maintains its current production strategy, the implication is that the string of quarterly declines that began in 3Q20 will come to an end in the next quarter. In other words, the oil market is sleepwalking into a supply surplus,” broker PVM Oil said on Friday.
“OPEC and its allies will at the very least need to put a pause on the easing of their supply curbs in the new year. Inaction will result in global oil stocks swelling once again and oil prices making a beeline lower,” analysts at the oil broker noted.
By Tsvetana Paraskova for Oilprice.com
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