November 27, 2015 / 12:27 AM / 4 years ago

Oil drops in light volume; cautious week expected before OPEC

NEW YORK (Reuters) - Oil traded lower in light post-holiday volume in New York on Friday as the dollar’s rally to an eight-month high and a tumble in Chinese equities added pressure to oversupplied crude futures.

A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. REUTERS/Nick Oxford

U.S. crude’s West Texas Intermediate (WTI) futures were down more than 2 percent, reopening after Thursday’s Thanksgiving holiday. Brent crude slipped about 1 percent.

The dollar hit late-March highs against a basket of currencies on speculation the Swiss National Bank would follow the European Central Bank in dropping deposit rates. A stronger greenback makes dollar-denominated commodities, including oil, less affordable for holders of currencies such as the euro. [USD/]

In China, stock prices slumped 5 percent, hit by regulatory worries and declining industrial sector profits. [MKTS/GLOB]

“Low volume holiday trade, largely off on strong dollar and hard sell-off in Chinese equity markets,” Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates said in a commentary on oil.

WTI was down $1.10 at $41.94 a barrel by 11:48 a.m. EST (1648 GMT).

Benchmark Brent oil traded 57 cents lower at $44.89 a barrel.

WTI and Brent were both on track to small weekly gains, although month-to-date, they were roughly down 9 percent.

Analysts expect oil to enter more cautious trading next week ahead of Friday’s all-important policy setting meeting of the Organization of the Petroleum Exporting Countries.

Increased geopolitical risks have also waded into oil lately. Moscow threatened economic retaliation against Turkey on Thursday for this week’s downing of a Russian warplane.

While OPEC is expected to stick to high output levels to defend market share, traders and investors are wary of recent comments by top crude exporter Saudi Arabia that it was open to working on price support measures with other oil producers.

“The meeting promises to be very lively and acrimonious,” David Hufton, analyst at London-based PVM, said. “There may even be walkouts ... and it could still spring a very unlikely surprise.”

Some OPEC officials on Friday questioned an upbeat demand forecast from its researchers, expressing scepticism there will be a quick easing by 2016 of the global supply glut in oil.

Additional reporting by Libby George in London and Meeyoung Cho in Seoul; Editing by Bernadette Baum

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