Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements.
The revelation in the latest BIS quarterly review, published on Monday, confirms market speculation about a move out of dollars and could put new pressure on the ailing US currency.
Market liquidity is traditionally low in December, and many traders have locked in profits, potentially reinforcing volatility.
Russia and the members of the Organisation of the Petroleum Exporting Countries, the oil cartel, cut their dollar holdings from 67 per cent in the first quarter to 65 per cent in the second.
Meanwhile, they increased their holdings of euros from 20 to 22 per cent, the BIS said. The speed of the shift may help to explain the weakness of the dollar, which recently fell to a 20-month low against the euro and a 14-year low against sterling.
Two years ago Saudi Arabia, the world’s biggest oil exporter, opened its spigots and let supply out-pace demand. The result was a gradual build up in oil inventories in the US, Europe and several Asian oil-consuming countries.
This month Ali Naimi, the country’s influential oil minister, appeared abruptly to reverse that accommodating policy. At a meeting in Cairo he told reporters that the market was “significantly” oversupplied.
“Inventories in the US are high, not low . . . That’s why the market is out of balance,” the minister said, adding that 100m barrels of oil should be cut to rebalance it.
The Dictatorship of The Black Gold still controls us.