Oil falls over 2% as dollar scales 1-1/5 year high

Oil futures fell over 2% in American track on track for weekly losses as the dollar index spiked to June 2017 highs, following earlier data from China, the world's largest energy importer, and the US. 

As of 07:33 GMT, US crude futures due in January fell 2.78% to $51.12 a barrel, while Brent February futures slid 1.95% to $60.25 a barrel, as the dollar index rose 0.40% to 97.45 to 1-1/5 year highs. 

Earlier Chinese data showed the unemployment rate fell to 4.8% from 4.9%, while retail sales rose 8.1%, slowing down from 8.8%, as industrial output slowed down in growth to 5.4% from 5.9%. 

From the US, retail sales rose 0.2% in November, beating estimates of a 0.1% increase, while down from October's 1.1% increase. 

Core sales, excluding transportation, rose 0.2%, matching estimates and down from 1.1% in October. 

US industrial production rose 0.6% in November, compared to a 0.2% dip in October, beating estimates of a 0.3% increase.

The capacity utilization rate rose to 78.5% from 78.1%, slightly missing estimates of 78.6%. 

Finally, the manufacturing PMI receded to 53.9 from 55.4, while the services PMI slipped to 53.4 from 55.4, missing estimates of 54.7. 

 US Inventories 

The Energy Information Administration reported a deficit of 1.2 million barrels in US crude stocks in the week ending December 7, compared to a 7.3 million drop in the previous reading, while analysts expected a 3M decline, with total stocks now down to 442 million barrels, while still 7% above five-year averages. 

Gasoline stocks rose 2.1 million barrels, marking them 3% above averages, while distillate stocks fell 1.5 million barrels, making them 8% below averages. 

Otherwise, reports circulated of a potential cut in Saudi oil exports to the US to 582 thousand bpd, down 40% from three-month averages, and compared to 860 thousand bpd in 2018 on average.

Otherwise, OPEC cut forecasts for demand on its oil in its monthly report by 100 thousand bpd to 31.44 million bpd for next year, as competitors pump larger amounts while economic growth slows down. 

On a similar note, Saudi Arabia said it plans to cut output to 10.2 million bpd in January, a 900 thousand bpd cut from November, while Russia plans a cut between 50 and 60 thousand bpd next month. 

OPEC announced an agreement to cut total output by 1.2 million bpd in coordination with allies such as Russia, with the cuts to start in January and with Iran, Libya, and Venezuela, gaining exceptions from the required cuts.

Russia's current output stands at about 11.37 million bpd, while recent reports indicate that Saudi Arabia's production increased by 0.5 million bpd last month to up to 11.3 million bpd, as US output steadied at record highs at 11.7 million bpd.

Libyan production is expected to tumble by 315 thousand bpd due to the cut-off in supplies from the Sharara oil field after armed militias took over it, with another 73 thousand bpd down from another field.