Believe it or not but Saudi Arabia, which flooded the world oil market in July with a record 10.87 million barrels a day, now claims that major producers will need to move to steady the market at a meeting next month.
Khalid al-Falih, Saudi Arabia’s energy minister, said Thursday the Saudis could discuss possible action to stabilise the market with OPEC members and other producers at a meeting next month, according to a report in The Wall Street Journal.
His comments came hours after the International Energy Association warned that a “massive overhang of stocks is also keeping a lid on prices, with both newly produced and stored crude competing for market share in an increasingly volatile refinery margin environment.”
But the Agency pointed out that the oil market will be in balance in the current half of 2016.
"Oil’s drop …. has put the ‘glut’ back into the headlines even though our balances show essentially no oversupply during the second half of the year," the IEA said in its monthly report.
The Saudi minister’s comments reversed a gathering sell-off on the back of the IEA report.
September West Texas Intermediate crude futures leapt 4.3% or $1.78, to settle at $US43.49 a barrel in New York. The settlement was the highest since July 22, according to FactSet data.
In London, October Brent crude futures jumped $US1.99, or 4.5%, to $US46.04 a barrel – also the highest finish since July 21.
The surge in oil prices (and good results from leading US retailers) saw Wall Street rise, helped the futures market on the ASX200 to a 33 point gain, and left the Aussie dollar around 77 US cents this morning.
Prices for both crude grades posted declines of more than 2% Wednesday, with losses triggered by a weekly rise US crude inventories and that daily record output by Saudi Arabia.
Saudi Arabia’s record July helped push OPEC daily production to 33.1 million barrels in the same month.
The Financial Times reported that Khalid Al Falih’s comments came from an interview with the official Saudi news agency, which were mistakenly sent to journalists, come after Opec nations said they would be meeting informally at the sidelines of a major commodities conference next month.
The reassurance has helped oil regain its poise after the commodity fell back into bear territory last week. Brent crude had risen to near $US52 in July, but fell back below $US40 as concerns about bloated gasoline supplies in the US, and rising oil rig use in the US.
The oil market has been down this track before inJune when there was talk of how the Saudis would help stabilise the market – only for the Saudi government to reveal it would only help if Iran cut production as well. Oil traders seem to be ignoring that experience.
