Oil stays below $40 after OPEC decides against output cut

Oil stayed below $40 a barrel in Asia Monday after the OPEC cartel decided against slashing high output levels and traders turned their focus to a U.S. central bank meeting next week.

U.S. benchmark West Texas Intermediate for delivery in January was down 37 cents at $39.60 and Brent crude for January was trading 12 cents lower at $42.88 a barrel at around 0210 GMT.

At a meeting in Vienna on Friday, the Organization of the Petroleum Exporting Countries decided against cutting its oil output to lift prices, its president and Nigerian oil minister Emmanuel Ibe Kachikwu said.

OPEC, whose members together pump out more than one third of world oil, is currently producing above its official target of 30 million barrels per day despite a global crude supply glut that has battered prices for more than a year.

“Crude oil were no doubt compressed by the lack of an agreement at the OPEC, signaling that the supply glut will persist longer,” Bernard Aw, market strategist at IG Markets in Singapore.

“WTI is trading below the key $40 (mark) and it looks set to remain there.”

Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at professional services firm EY, said market attention is now turned to a meeting of Federal Reserve policymakers and to the latest economic data from China, the world’s top energy consumer.

Traders are watching whether the Fed will will raise interest rates, a move that will boost the dollar. A stronger U.S. currency will make dollar-priced oil more expensive to holders of weaker units, denting demand and prices.

“While all eyes are now on the Federal Reserve as it meets next week for the last policy meeting this year to decide whether to raise its benchmark rate, economic data from China will set the tone of prices in the coming weeks,” Gupta said.

He said the dollar also got a boost from a strong U.S. jobs report on Friday. The report strengthens the case for a Fed rate hike, analysts said.