Oct. 20 (UPI) -- The rise in the value of the U.S. dollar and tolerance for the risk in the oil-rich Kurdish north of Iraq pushed oil prices lower in early Friday trading.
Republicans in the U.S. Senate gathered enough support to approve a 2018 budget resolution backed by President Donald Trump that will serve as a framework for the party's plans for a comprehensive tax reform. Trump endorsed the budget plan, which would cap a 10-year deficit hike at $1.5 trillion. The plan projects $2.5 trillion in revenue next year with a deficit of $641 billion.
The passage helped improve the value of the U.S. dollar when measured against a basket of foreign currencies on Friday. The value of the dollar influences internationally traded commodities like gold and crude oil. When the value increases, commodity prices decrease because fewer dollars are required to purchase the same quantity as when the value was lower.
Igor Sechin, the head of Russian oil producer Rosneft, said last month the value of the U.S. dollar was having a greater market impact than the effort by the Organization of Petroleum Exporting Countries to balance the market with coordinated production declines. Russia is a party to the effort and is cutting the most among non-OPEC members.
The price for Brent crude oil, the global benchmark, was down 0.2 percent at 9:15 a.m. EDT to $57.11 per barrel. West Texas Intermediate, the U.S. benchmark, was lower than Thursday's close by 0.5 percent to $51.25 per barrel.
Vandana Hari, a market analyst and founder of Vanda Insights, said the market has been pricing in the risk of conflict in northern Iraq. The skirmishes threaten to disrupt about 600,000 barrels of oil per day pumped from Kurdish territories and the surrounding Iraqi provinces. As the second largest producer in the Organization of Petroleum Exporting Countries, Iraq's stability and its 4.5 million barrels per day matter to the oil market.
"But not all of the country's production is under threat, especially as the majority of it comes from fields in the south, away from the Kurdish conflict," she said in an emailed market report.
The move lower for oil prices Friday came as Paal Kibsgaard, the head of the largest oilfield services company in the world, Schlumberger, said there are clear market signals supportive of higher oil prices. The market, he said, "is now in balance."
Kibsgaard added that, if the balancing trends continue in the right direction, the market would reach the point of recovery and prices could be supported further by the geopolitical risk premium