Oil slips below $56 on uncertainty from German coalition talks to OPEC

Bloomberg

Oil held near $56 a barrel as markets digested political uncertainty from Germany to the Middle East and anticipation about OPEC’s next move kept traders on the defensive.
Futures slipped as much as 1.7 percent in New York after rising 2.6 percent. In Germany, the breakdown of talks to form a new government coalition raised questions about the future of Europe’s biggest economy. The Organization of Petroleum Exporting Countries, meanwhile, will be briefed this week by oil-service provider Schlumberger Ltd. as well as Citigroup as the cartel debates whether to extend output cuts at a summit in Vienna
November 30.
The political turmoil in Germany helped strengthen the U.S. dollar, which depresses oil prices, said Bill O’Grady,
chief market strategist at Confluence Investment Management in St. Louis. Data released showed wagers on lower Brent prices rose by the most in
five months through the week ended November 14 as dou-
bts persist about whether the Saudi Arabia-led cuts will be
extended.
“Politically, around the world, there are just a lot of plates spinning,” O’Grady said in a
telephone interview on Monday. “There’s potentially a lot of supply out there and the only thing keeping it off the market right now is OPEC discipline.”
Traders may also be closing out some bullish bets on crude ahead of the Thanksgiving holiday in the US, O’Grady said, when light volumes could make it harder to adjust to any bearish news.
“What you’re seeing is a lot of position squaring,” he said.
West Texas Intermediate for December delivery, which expires Monday, slipped 79 cents to $55.76 a barrel on the New York Mercantile Exchange at 10:54 a.m. Total volume traded was about 3 percent above
the 100-day average but still near a low point for the year. Prices declined 0.3 percent
last week. The more-active
January contract dropped 46 cents to $56.24.
Brent for January settlement lost $1.01 to $61.65 a barrel on the London-based ICE Futures Europe exchange, after dropping 1.3 percent last week.
The global benchmark crude traded at a premium of $5.78 to January WTI.
Saudi Arabia has had extensive consultations with Russia, Saudi energy minister Khalid Al-Falih said. OPEC will ensure that its exit strategy from the current accord will be a gradual adjustment that prevents the return of any glut, he said.