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[SINGAPORE] Oil prices dipped early on Thursday ahead of the expected announcement of a bond-buying programme by the European Central Bank (ECB) later in the day that could push the dollar to new highs and put downward pressure on commodities.
The ECB's Executive Board has proposed a programme that would enable it to buy 50 billion euros (US$58 billion) in bonds a month starting in March, according to a euro zone source.
The expected stimulus programme has put pressure on the euro and sent the dollar, seen as a safehaven, soaring.
The rising dollar, helped further by an expected US interest rate hike this year and an American economy that is growing while Europe and Asia slow, has put downward pressure on oil, which has seen prices move than halve since last June due to oversupply, in part produced by soaring US output.
International benchmark Brent crude futures were trading at US$48.89 per barrel at 0139 GMT, down 14 cents since their last settlement. U.S. WTI crude was down 41 cents at US$47.37 a barrel.
Given the overall situation, the price outlook for oil remains weak.
Khalid Al-Falih, chief executive of Saudi Aramco said during the World Economic Forum in Davos, Switzerland, that his only real surprise about the low oil prices was that people were surprised about it.
Al-Falih identified four factors behind the sharp fall in oil prices: High price environment for a number of years fuelled growth in supply; efficiency and high oil prices crimped demand growth; reality of fundamentals bursting the bubble of geopolitical fears that encouraged investors to drive prices up; and the strong dollar contributing to the collapse of a bubble.
Germany's Commerzbank said it expected the oil price to fall initially towards the low of the economic and financial crisis in February 2009 at nearly US$40 per barrel. "The USA now produces a good 9 million barrels of crude oil per day, the largest volume in 28 years. Despite high refinery utilisation levels, crude oil stocks are soaring. Never before were stocks in the US as ample at this time of the year as they are at present," it said.