Rumaila oil field in Basra
File photo: A worker walks at Rumaila oil field in Basra, Iraq. Image Credit: REUTERS

Dubai: It looks as if US President Donald Trump has been successful in pushing the oil market, along with the dollar, further into bear territory.

Oil prices retreated below $70 (Dh257) per barrel after a strong pullback just after it witnessed the longest losing streak since July 1984 last Friday.

Brent crude prices traded 1.47 per cent lower at $69.09 per barrel on Monday. Brent crude prices are still down more than 20 per cent after it touched a four-year high of $86.29 seen on September 20. West Texas Intermediate (WTI) was 2.12 per cent lower at $58.66 per barrel.

“We moved from oil shortage fears early October to we-are-awash-in-oil recently. This has been driven by several factors: Trump’s exemptions on Iranian oil, rising production in Russia and the US and rising US oil inventories,” Giovanni Staunovo, Commodity Analyst at UBS told Gulf News.

Saudi Arabia said on Sunday it will slash production by 500,00 barrels, or about 0.5 per cent of current global supply to which Trump responded that Saudi Arabia and Opec, which have an output cut agreement in place since January 2017, will not be cutting oil production again. The possibility of an output cut is a 360-degree turn from deliberations to raise output to fill in the void left by sanctions-hit Iran, which produces 3.8 million barrels of oil per day, making it the third-largest producer.

Analysts are yet to see a floor to the price and it would depend on many factors.

“We expect that output cuts from Opec and the ongoing downwards revisions on US oil output for 2019 will put a floor to prices. In fact we think that prices are about to bottom up and will close the year above $70,” Francisco Quintana, Economist Head of Strategy at Foresight Advisors said.

Staunovo from UBS expects oil prices to recover. “I still believe Iranian oil exports will fall by 1-1.5mbpd (million of barrels per day) into the year-end from the April levels and as oil demand growth remains solid, I expect oil prices to recover over the coming weeks towards $85 (per barrel) for Brent,” Staunovo said.

“To see a turnaround in prices, US crude inventories need probably to peak. With US refineries increasing their runs as they exit the maintenance season that should happen in the next few weeks,” he added.