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Oil slips towards $85 on dollar strength

LONDON — Brent crude oil slipped towards $85 a barrel on Monday as a stronger dollar outweighed evidence of lower oil production by Opec ahead of the producer group’s meeting later in November

The dollar powered to a seven-year peak against the yen and a two-year high against the euro on Monday, extending gains after the Bank of Japan’s latest stimulus and punishing oil and gold priced in the US currency.

Benchmark brent crude oil has fallen by a quarter from a high above $115 a barrel in June as abundant supply has overwhelmed demand in most parts of the world, filling stocks.

Brent crude for December delivery was down 40 cents at $85.46 a barrel by 2.30pm GMT. The oil benchmark fell more than 9% in October, hitting its lowest in almost four years at $82.60 on October 16.

US crude was down 15c at $80.39 per barrel after losing more than 11% last month.

"The dollar is strong," said Tamas Varga, oil analyst at brokerage PVM Oil Associates in London. "I have been expecting higher prices for quite some time now but the dollar strength hinders any price advances." The Organisation of the Petroleum Exporting Countries pumped 120,000 barrels per day (bpd) less crude oil in October, a Reuters survey showed on Friday, although overall supply stayed well above the cartel’s output target of 30-million bpd.

Less oil from Nigeria and Angola brought total Opec supply to an average of 30.72-million bpd in October, down from a revised 30.84-million bpd in September.

Opec ministers meet in Vienna on November 27 to decide on production targets for next year.

Most oil analysts forecast no change in the group’s output target, although French bank Societe Generale expects a cut.

"Though the (Opec) meeting could be ugly, we believe they will ultimately succeed in agreeing on a shared output cut of 1.0-1.5-million bpd," said Michael Wittner, senior oil analyst at Societe Generale in New York.

Venezuela and Ecuador are preparing a joint proposal to defend oil prices that the two countries will present at the next Opec meeting, Venezuelan President Nicolas Maduro has said.

"We’re working internationally to defend, as we should, the price of oil," Mr Maduro said in a televised broadcast on Friday.

Economic data has been mixed for oil.

Growth in China’s vast factory sector accelerated to a three-month high in October as smaller firms saw more orders, according to a private survey, although overall numbers pointed to a sluggish economy that is losing momentum.

The final HSBC/Markit Manufacturing Purchasing Managers’ Index (PMI) for China edged up to 50.4 in October from September’s 50.2.

While the headline number looked slightly better, growth rates slowed in several key areas heading into the fourth quarter, putting the Chinese government’s full-year growth target of 7.5% further in doubt.

A survey by China’s National Bureau of Statistics (NBS) on Saturday showed factory activity fell to a five-month low last month as firms struggled with slowing orders and rising borrowing costs.

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Published on:
November 3, 2014
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