Crude futures fall on profit taking as US dollar slows losses

London (Platts)--4Dec2006

Global crude futures weakened Monday, relenting from strong gains made
last week, as the US dollar's recent weakness seems to have halted and OPEC
appeared to lack consensus yet on whether another round of production cuts
were needed at its upcoming meeting December 14.
At 1140 GMT the January ICE Brent futures contract traded at
$63.85/barrel, down 67 cents from Friday's settlement. The two January WTI
contracts on ICE and NYMEX were down 58 cents and 57 cents respectively at
$62.86/barrel and $62.85/barrel.
"The US dollar has got to make fightback and I think it's started now.
The same is happening with crude. Last week the primary reason for prices
going up so much was due to the weak dollar," a London-based broker said.
Market players said that traders have started selling the rally taking
profit as they feel the dollar weakness is now at its lowest level.
The dollar hit 20-month lows against the euro after surprisingly weak
manufacturing data further jolted confidence in the world's largest economy,
dealers said. The euro rose to 1.3344 dollars from 1.3337 in New York Friday
for its highest levels since March 2005.
The weak dollar has been mentioned by OPEC as a factor they will look at
when the ministers meet in Abuja on December 14.
The group's Nigerian president Edmund Daukoru Monday said Monday the
"dramatic" loss in the value of the US dollar was causing concern among
ministers and would be a topic to be discussed at the Abuja meeting.
"When we take into account the price, we have to look at the stock levels
and the forecast for winter, but there has been a dramatic loss in the dollar
and we will have to bear that in mind," he said.
With regard to whether OPEC will cut oil production further when they
meet in ten days, Daukoru said that the group does not have a consensus to cut
production.
"I am not concerned about a consensus at this stage, there are still ten
days to go before the meeting and I don't see a problem on reaching a
consensus when we meet and discuss the issues collectively," Daukoru told
Platts by telephone from Abu Dhabi, where he is participating in a gas
conference.
Daukoru, who is also Nigeria's oil minister, said Friday he expected the
group to cut output by 500,000 b/d at the upcoming meeting. "When we meet (on
December 14), we will look at the data and the trend and I do not expect
anything less at this meeting," AFP quoted Daukoru as saying at the time.
"There is likely to be some further trimming. The actual amount (to be cut)
would depend on circumstances. And what we are seeing now will definitely
influence our decision: how much to cut."
On a technical note, front-month Brent futures have failed to break
through the $64.80/barrel resistance level. In the past three trading sessions
this level has been reached but failed to significantly rise through it,
market players said.
--Jean-Luc amos, jean-luc_amos@platts.com

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