Oil futures declined nearly 3% Friday, as the dollar strengthened. The dollar traded higher compared to major rivals by the end of the last week. The dollar index, which compares the U.S. unit against a basket of six other currencies, stood at 74.710, up from 74.200 in North American. A stronger greenback is negative for oil and other dollar-denominated commodities as it makes them more expensive for holders of other currencies.
Another significant reason for the decline of oil price is a report that Saudi Arabia will pump more oil next month. A Saudi Arabia newspaper has stated the world’s top oil exporter is set to pump 10 million barrels a day in July, according to analysts and news reports. That would be 500,000 barrels a day more than the Kingdom’s June production, analysts at J. P. Morgan said. In addition, the country is selling more oil to Asian refiners, analysts said.
OPEC failed to agree on an oil output increase during its last week’s meeting in Vienna. On Friday, however, market participants realised that the inconclusive OPEC meeting would not prevent oil producers from going ahead with plans to increase production. If Saudi Arabia will produce more oil, other based in the Gulf oil producing countries will likely follow suit.
Crude for July delivery declined $2.64, or 2.6%, to $99.29 a barrel on the New York Mercantile Exchange. Oil futures decline 0.9% on the week.
Also Friday, the OPEC issued its monthly oil market report, assessing the cartel’s production at 31 million barrels of oil a day in the third quarter of 2011, an increase of 2.1 million barrels a day on-quarter. In addition, the organization warned of a supply gap in the second half of the year, although it tempered the gloomy forecast by casting more doubt on global economic growth, a proxy for energy demand.