New York — Oil futures retreated from three month highs Tuesday as traders booked profits ahead of the New Year's holiday.
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ICE March Brent settled down 67 cents at $66.00/b and NYMEX February WTI was down 62 cents on the day at $61.06/b.
"We are lower today due to some end of year profit-taking plus some dollar movement," Price Futures Group senior market analyst Phil Flynn said.
The ICE US Dollar Index futures slipped to 6 month lows interday at 96.02 in early US trading but met resistance at this level and trended higher later in the session. At the close of oil trading the index was trading at around 96.125.
"The initial move lower seemed to be dollar related," Flynn said. "The dollar had been moving steadily lower for weeks and then suddenly got a little lease on life."
US dollar strength and oil futures are typically inversely correlated.
NYMEX January ULSD settled down 1.23 cents at $2.0283/gal and January RBOB was 3.05 cents lower on the day at $1.6978/gal.
Crude and product futures had climbed to three month highs in recent days, prompting traders to book profits, analysts said.
"The end of the year finished pretty strongly, but we are definitely getting to levels where some of the market rally is going to meet stronger resistance," Tradition Energy analyst Gene McGillian said. "For the market to tack another leg on the rally we needs signs of the global economy picking up and that the OPEC+ group is willing to take additional steps to offset new barrels from non-OPEC producers."
Russian energy minister Alexander Novak said last week that Russia, OPEC and nine other non-OPEC partners comprising the so-called OPEC+ group might consider ending oil output cuts in 2020 in order to preserve market share and implement projects that are likely to limit price gains. For the first three months of 2020, the group agreed to deepen output cuts by 503,000 b/d to 1.7 million b/d.
On Monday, Iraq resumed production from the 80,000 b/d-85,000 b/d Nasiriyah southern oil field that was shut down Sunday by protesters.
Any downside was tempered by simmering geopolitical tensions in the Middle East and an announcement from US President Donald Trump that America and China would sign the Phase 1 trade deal on January 15.
"I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15. The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!" Trump said via Twitter Tuesday morning.
Meantime, protesters stormed the US embassy compound in Baghdad Tuesday, angered by US air strikes on an Iran-backed Iraqi militia over the weekend. The protests had only limited impact on oil prices Tuesday, but ongoing instability in Iraq could be a potentially bullish factor for prices in early 2020.
"The market isn't reacting to that yet because it doesn't see it as a threat to supply, but that can change fairly quickly depending on the US response," Flynn said.
-- Chris van Moessner, firstname.lastname@example.org
-- Edited by Benjamin Morse, email@example.com