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Crude oil futures - weekly outlook: October 26 - 30

Published 25/10/2015, 12:57
© Reuters.  Oil falls to 3-week lows as stronger dollar weighs
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Investing.com - Crude oil futures fell to three-week lows on Friday, as a stronger U.S. dollar coupled with ongoing concerns over the current glut in global supplies drove down prices.

On the ICE Futures Exchange in London, Brent oil for December delivery slumped 9 cents, or 0.19%, on Friday to close at $47.99 a barrel. It earlier fell to $47.45, the lowest since October 2.

The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rallied on Friday to close at 97.24, the highest since August 12. The greenback ended the week up 2.8%, the first weekly gain in four weeks.

Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.

The dollar surged due to the diverging monetary policy outlook between the Federal Reserve and its major peers in Europe and Asia.

For the week, London-traded Brent futures tumbled $2.39, or 4.89%, as ongoing worries over the health of the global economy fueled concerns that a global supply glut may stick around for longer than anticipated.

The People's Bank of China cut its benchmark interest rate by a quarter percentage point to 4.35% on Friday, the latest in a series of measures aimed at stimulating economic activity and boosting growth.

It was the sixth rate cut over the past 12 months, fueling concerns that economic growth is weakening more than is currently expected.

The moves come several days after Chinese government data showed third-quarter economic growth slowed to 6.9%, the first time since the global financial crisis that the country’s gross domestic product has grown less than 7%.

China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.

Elsewhere, on the New York Mercantile Exchange, crude oil for delivery in November declined 78 cents, or 1.72%, to end Friday's session at $44.60 a barrel. Prices earlier hit $44.20, a level not seen since October 2.

Nymex oil held on to losses after industry research group Baker Hughes (N:BHI) said late Friday that the number of rigs drilling for oil in the U.S. decreased by one last week to 594, the eighth straight weekly decline.

On the week, New York-traded oil futures plunged $2.67, or 5.63%, as traders focus on the current glut in supplies despite a tighter production outlook.

According to the U.S. Energy Information Administration, crude oil inventories rose by 8.0 million barrels last week. Market analysts' expected a crude-stock rise of 3.9 million barrels.

At 476.6 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years.

Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the Organization of Petroleum Exporting Countries last year not to cut production.

Saudi Arabia and other Gulf OPEC members have indicated they will continue to stick to their policy of defending market share by keeping production high.

Oil prices have lost nearly 60% since last summer as lingering concerns over a glut in world markets drove down prices.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at $3.39 a barrel by close of trade on Friday compared to $2.70 by close of trade on Thursday.

In the week ahead, investors will be focusing on Wednesday’s monetary policy announcement by the Federal Reserve for fresh indications on the timing of an initial rate hike.

Market participants will also be awaiting a preliminary estimate of third quarter growth from the U.S. on Thursday to gauge the strength of the economy.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, October 26

In the euro zone, the Ifo Institute is to report on German business climate.

The U.S. is to release data on new home sales.

Tuesday, October 27

The U.K. is to release preliminary data on third quarter economic growth.

The U.S. is to produce data on durable goods orders and consumer confidence, while the American Petroleum Institute, an industry group, is to publish its weekly report on oil supplies.

Wednesday, October 28

The U.S. is to publish a weekly government report on crude oil inventories.

Later in the day, the Federal Reserve is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

Thursday, October 29

In the euro area, Spain and Germany are to release preliminary data on inflation and Germany is to publish data on the change in the number of people unemployed.

The U.S. is to release advance data on third quarter economic growth, the weekly report on jobless claims and private sector data on pending home sales.

Friday, October 30

The Bank of Japan is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

The euro zone is to publish preliminary data on consumer inflation and unemployment and Germany is to release data on retail sales.

The U.S. is to round up the week with data on personal income and spending and a report on manufacturing activity in the Chicago region.

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