Oil fell from the highest level since July 2015 as the dollar strengthened while doubts persisted about the ability of OPEC and its partners to balance the market.
Futures slipped on the first trading day of 2017 after rising 45 percent last year, the biggest annual gain since 2009. Prices touched an 18-month high earlier as output cuts by Kuwait and Oman signalled OPEC and its partners are delivering on their deal to stabilize the market. Oil fell from the session’s highs as a strengthening greenback reduced investor demand for commodities priced in the U.S. currency.
Oil rose in 2016 for the first time in three years as the Organization of Petroleum Exporting Countries and 11 other countries agreed to cut output starting Jan. 1 in an effort to reduce bloated global stockpiles. Libya, which isn’t party to the OPEC cuts, is ramping up output from its biggest oil field again, a reminder of how vulnerable the quest to clear the glut might be. Rigs targeting crude in the U.S. rose last week to the highest level since January.
“Too much faith has been put in OPEC and the other countries that have promised cuts,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “They have been increasing output the last few months, so the cuts will be like New Year’s crash diet, and we know how those end.”