But they sharply
reversed direction as analysts further doubted a looming reduction in the
amount of oil being pumped out by leading producers.
Around 1700
GMT, US benchmark West Texas Intermediate for delivery in March slumped to
$31.84 a barrel, down $1.78 compared with Friday’s close. Brent North Sea crude
for April delivery shed $1.46 to $34.53. Brent had earlier Monday struck a
three-week high at $36.25 before profit-taking took hold.
“Crude
oil has started the new week on the back foot, giving back a big chunk of the
sharp gains made in the previous couple of weeks,” said Fawad
Razaqzada, analyst at City Index.
“Profit-taking
is one of the main reasons for the oil price drop today,” he added.
Analysts
cautioned against putting too much hope on talks between non-OPEC crude
producer Russia and the cartel on reducing output in a move that could support
prices.
Crude
futures have crashed by about three quarters since mid-2014 owing to global
oversupply, weak demand growth and strong dollar.
But both
contracts surged Thursday after Russian reports that Energy Minister, Alexander Novak, had said Moscow was
ready to take part in talks with OPEC to establish possible “coordination”.
He said the
discussions could be on making production cuts of up to five percent per country.
“Oil
has stopped its bullish momentum and most of the reason comes from the
relatively strong dollar on light of Japan’s surprising negative interest rate
decision,” said Phillip Futures analyst
Daniel Ang.
As oil is
traded in dollars, a rise in the greenback makes crude more expensive for
holders of weaker units, dampening demand. Oil prices closed higher last week
to end a turbulent January in which prices plunged to 12-year lows.
The dollar
has meanwhile gained support after Japan’s central bank shocked markets Friday
with a decision to adopt a below-zero interest rate policy to spur bank lending
and drive up inflation.
Bank of
Japan chief Haruhiko Kuroda cited recent financial market turmoil and a China
slowdown for ushering in a -0.1 percent rate on new reserves, and said the bank
may go even further into negative territory. (Guardian)
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