Oil extends losses as dollar rally offsets Saudi deal optimism

Sydney - Oil extended its losses for a third day as a rally in the US dollar offset optimism by Saudi Arabia that the Organisation of the Petroleum Exporting Countries (OPEC) will finalise a deal this month to curb output and stabilise prices.

Futures declined as much as 1.9% in New York, trimming the first weekly advance since late October.

Federal Reserve chair Janet Yellen signalled the US central bank is close to raising interest rates, spurring a stronger dollar and making commodities priced in the currency less appealing to investors.

Saudi Arabia is optimistic a deal will be reached to put a ceiling on production, Energy Minister Khalid Al-Falih said on Al Arabiya television.

Oil has retreated since reaching a 2016 high last month near $52 a barrel amid scepticism about the ability of OPEC to implement a deal at a meeting on November 30.

The group is seeking to trim output for the first time in eight years, a plan complicated by Iran’s commitment to boost production and Iraq’s request for an exemption to help fund its war with Islamic militants.

OPEC is near a consensus on capping supply for at least six months, according to Algeria.

"The strengthening US currency is compounding the weight on oil," said Ric Spooner, a chief market analyst at CMC Markets in Sydney. "The market will remain a little cautious ahead of the OPEC meeting."

West Texas Intermediate for December delivery declined as much as 85 cents to $44.57 a barrel on the New York Mercantile Exchange, and was at $44.67 at 8:35 in London.

The contract dropped 15 cents to $45.42 a barrel on Thursday. Total volume traded was about 22% above the 100-day average. Prices are up 2.9% this week.

OPEC deal

Brent for January settlement lost as much as 74 cents, to $45.75 a barrel on the London-based ICE Futures Europe exchange. The contract fell 0.3% to $46.49 a barrel on Thursday. The global benchmark crude traded at a premium of 60 cents to WTI.

See also: Algeria says no going back on OPEC output deal

The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, rose 0.5%, reaching the highest intraday level since February. The gauge is up 1.9% this week.

OPEC agreed at a September meeting in Algiers to reduce collective output to 32.5 million to 33 million barrels a day and has been trying to persuade other suppliers to join the cuts, notably Russia.

Trimming supply to the lower end of that range will help speed up a recovery of the market, Al-Falih said.

Oil-market news:

Kuwait renewed a contract to supply Egypt with crude oil for the next three years, according to a senior Kuwaiti government official.

Nigeria reached a $5.1bn settlement to reimburse foreign oil companies including Exxon Mobil Corporation and Royal Dutch Shell for past operating costs.