NEW YORK (Reuters) - Oil prices edged lower on Monday, pressured by a strong U.S. dollar and gloomy economic prospects in Europe and Asia, but supported by ongoing supply outages in Nigeria.
The Organization of the Petroleum Exporting Countries said production fell by 100,000 barrels per day (bpd) in May led by Nigeria, while pointing to a supply deficit in the second half of the year if the group keeps pumping at May’s rate.
Last week, prices hit 2016 highs above $50 a barrel on worries about sabotage of oil facilities in Nigeria.
The dollar .DXY has risen about 1.4 percent from June lows, lifted by Brexit worries, concerns about Asia and nervousness about a potential U.S. rate hike. [USD/] A strong dollar makes fuel imports more expensive for countries using other currencies.
“Bit of an inflection point for the oil markets right now with macro factors and the rising rig count weighing in on the negative sentiment while the Niger Delta Avengers are a good reminder that geopolitics will likely get worse before they get better,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.
Worries that Britain will vote to leave the European Union sent stocks tumbling, and could further dent oil’s recent gains, traders said. There are also concerns about faltering growth in China, largely due to industrial overcapacity and spiralling debt. [MKTS/GLOB]
“Investors seem to have backed away from buying ahead of either this week’s FOMC meeting or Britain’s referendum on EU membership on June 23,” said Tim Evans, energy futures specialist at Citi Futures.
Uncertainty over this week’s U.S. Federal Open Market Committee policy meeting has pressured oil, though the U.S. central bank is expected to leave rates unchanged.
Two weeks of increasing U.S. rig counts have made some investors nervous about rising crude production.
Oil traders have already sold out of long positions that profited from a sharp rebound in crude prices from the lowest levels in more than a decade.
However, continued supply outages have buoyed prices.
On Monday, the Niger Delta Avengers group, which has claimed most of the latest attacks on Nigeria’s oil infrastructure, spurned proposed talks with the government.
Additionally, some analysts expect oil demand in Asia and especially China to remain strong.
“Against the backdrop of low international oil prices, Chinese crude oil demand will remain well supported this year as demand continues to gain traction from stockpiling activities and refining use,” energy consultancy FGE said.
“We expect Chinese crude oil imports to grow by 730,000-760,00 bpd this year,” it said.
Additional reporting by Libby George in London and Henning Gloystein in Singapore; Editing by David Gregorio and Marguerita Choy
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