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Oil falls as players take profit on OPEC-fueled gains

Oil&Gas Materials 7 October 2016 22:53 (UTC +04:00)
Oil fell more than 1 percent on Friday as players took profit on a rally with little pause over the past week that propelled prices nearly 15 percent to four-month highs on hopes of OPEC crude output cuts
Oil falls as players take profit on OPEC-fueled gains

Oil fell more than 1 percent on Friday as players took profit on a rally with little pause over the past week that propelled prices nearly 15 percent to four-month highs on hopes of OPEC crude output cuts, Reuters reported.

Also weighing on the market was the steady rise in U.S. oil drilling as prices trade at or near $50 a barrel. A closely-watch report from oil services firm Baker Hughes on Friday showed U.S. drillers adding rigs in 14 of the past 15 weeks.

Brent crude LCOc1 was down 63 cents, or 1.2 percent, at $51.88 a barrel by 1:42 p.m. EDT (1742 GMT).

U.S. West Texas Intermediate (WTI) crude fell 58 cents, also about 1.2 percent, to $49.86.

Despite the drop, Brent and WTI remain up more than 10 percent since the Organization of the Petroleum Exporting Countries wrong-footed many market participants eight days ago with its first production cut plan in eight years.

OPEC is "back in business" of determining oil prices and only a "brave person" would bet against the cartel, an avowed oil bull Andy Hall said in a letter seen by Reuters to investors in his $2.5 billion hedge fund Astenbeck.

But with prices appearing to have gained too much, too soon - the Relative Strength Index for Brent and WTI was at 69 on Thursday, just below the overbought level of 70 - there was also pressure to liquidate. On Friday, the RSI for Brent was down at 67 while WTI fell to below 58.

"This is certainly not a one-way trade and we're seeing the other side acting now," said Tariq Zahir of Tyche Capital Advisors in New York which mostly trades in WTI timespreads.

"As much as the world wants to believe OPEC will cut some output, there are doubts what real good it will do to the oversupply," Zahir said. "Also, there is some delayed reaction by oil to the strength of the dollar this week."

The dollar index .DXY hit a two-month high earlier in the day before paring gains on disappointing U.S. jobs data.

Since OPEC proposed its production cut plan in Algiers on Sept. 28 that it said will be formalized at its policy meeting in Vienna in November, officials of the group have embarked on an unusual flurry of meetings to nail down details.

First up, OPEC energy ministers meet Russian officials for informal talks in Istanbul on Oct. 9-13.

But the group's tendency to often max out production makes the market wary. [OPEC/O]

"This isn't really sustainable," Hamza Khan, head of commodities strategy with ING, said of the rally of more than $6-per barrel that occurred over the seven days. "It all could be over by next week."

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