Oil fell to its lowest in three months on Monday, as the prospect of another year of oversupply and weak prices overshadowed chances that OPEC will reach a deal to cut output.
Donald Trump’s surprise win in last week’s US presidential election boosted the dollar and stocks but undermined oil. Crude has also fallen because of waning expectations that the world’s largest exporters will agree to reduce production this month.
Brent crude futures fell 50 cents on the day to $44.25 a barrel by 1303 GMT, while NYMEX crude futures shed 60 cents to trade at $42.81 a barrel.
“In the same way that a strong OPEC agreement was needed to continue the rally above $55, a lack of agreement will be needed to break below $40 and right now, we’re at $45,” Petromatrix strategist Olivier Jakob said.
OPEC plans to cut or freeze output, but analysts doubt the group’s ability to reach an agreement at its meeting on Nov. 30.
The Organization of the Petroleum Exporting Countries said on Friday its output hit a record 33.64 million barrels per day in October, and forecast an even larger global surplus in 2017 than the International Energy Agency on Thursday.
Yet, Saudi Energy Minister Khalid al-Falih has said it was imperative for OPEC to reach a consensus on activating a deal made in September in Algiers to cut production.
“OPEC know what needs to be done but too few members will agree to take the production pain for the price gain, knowing also that the price gain incentivises non-OPEC to produce more, lengthening the rebalancing process,” PVM Oil Associates analyst David Hufton said.
The dollar index hit an 11-month peak on Monday, driven by an aggressive sell-off in bonds that has pushed Treasury yields to their highest since January.
Ordinarily, a strong dollar would push oil lower, but the correlation between the two is at its most positive in two months, suggesting they are more likely to move in lockstep with one another than in opposite directions.
Data from the InterContinental Exchange on Monday showed investors delivered the largest weekly cut on record to their bets on a sustained rise in the price of oil.