Oil prices dropped for the second day on Tuesday. There were two contributing factors identified in the continuous decline. One was the rising U.S. output and the other was the strengthening dollar. As a result, Brent was pushed below $70 per barrel.
Brent, the global benchmark of crude futures, fell 0.5 percent or 33 cents and is now at $69.13 per barrel. The contract for March delivery was at $69.46 per barrel on Monday, dropping 1.5 percent or $1.06.
The U.S. West Texas Intermediate crude futures were down 47 cents or 0.7 percent to $65.09 per barrel. They fell 58 cents or 0.9 percent to $65.56 on Monday.
“Markets remain fragile to the downside,” said the head of trading Stephen Innes. He then pointed out the sudden increase in the number of rigs drilling for oil in the U.S.
U.S. production has reached the same level as that of Saudi Arabia which is the biggest producer in OPEC. The only country to surpass this has been Russia, which averaged at 10.98 million barrels per day (bpd) in 2017.
U.S. output has risen more than 17 percent since the middle of 2016. Analysts expect the output to move past 10 million bpd soon.
Baker Hughes released a report on Friday showing U.S. drillers adding 12 oil rigs for new production in the week leading to January 26.
The recent rally in the oil prices happened due to the U.S. dollar’s six straight weekly slides. The greenback so far this month is down 3 percent.
Since January 24, the dollar index has been below $90 before falling below $89 on Friday. It has recently rebounded to around $89.37 which weighed down on the crude prices.
Crude in Asia
On the other hand, mixed results were seen in the crude oil prices in Asia on Tuesday.
The drop in oil prices has been the opposite of the backdrop of rising investor bets. They expect oil prices to extend their rally.
According to the CFTC’s Commitment of Traders report, the hedge funds added to their bullish bets on WTI crude oil. It rose alongside long net positions, growing to 716,695, almost setting new record highs.
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