By BLOOMBERG
Ali Al-Naimi
Oil pared losses after closing at the lowest price since July 2009 as Saudi Arabia questioned the need to cut output, bolstering speculation that the Organisation of the Petroleum Exporting Countries’ (Opec) biggest producer will defend market share.
Brent futures rose as much as 1.1% in London while West Texas Intermediate (WTI) advanced 1.2% in New York. The market will correct itself, according to Saudi Arabian Oil Minister Ali Al-Naimi.
Global demand for crude from Opec will fall next year by about 300,000 barrels a day to 28.9 million, the least since 2003, the group predicted yesterday.
Oil’s collapse into a bear market has been exacerbated as Opec’s three largest members offered discounts on exports to Asia. The cartel, which supplies about 40% of the world’s crude, decided against reducing its output quota at a meeting last month even as the US pumps at the fastest pace in more than three decades.
“Crude prices will continue to trade at lows,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone today. “There are issues with supply and Opec are not going to cut while the US just keeps on producing.”
Brent for January settlement gained as much as 71 cents to US$64.95 (RM226.01) a barrel on the London-based ICE Futures Europe exchange and was at US$64.67 at 2:48 pm Singapore time. It dropped US$2.60 to US$64.24 yesterday. The European benchmark crude traded at a premium of US$3.25 to WTI. Prices have slid 42% in 2014.
‘Free market’
WTI for January delivery climbed as much as 72 cents to US$61.66 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost US$2.88 to US$60.94 yesterday. Total volume was about 5% below the 100-day average. Prices have decreased 38% this year.
Saudi Arabia led Opec’s decision on Nov 27 to maintain its collective quota at 30 million barrels a day, resisting calls from members including Venezuela to reduce output. The group pumped 30.56 million a day in November, exceeding its target for a sixth straight month, a Bloomberg survey of companies, producers and analysts showed.
“Why should I cut production?” Al-Naimi said to reporters yesterday in Lima, Peru, where he’s attending United Nations climate talks. “This is a market and I’m selling in a market. Why should I cut?”
Venezuela wants special discussions to be held before the group’s next scheduled gathering on June 5.
“Our position on Opec is that they defend the fair price of our oil,” Foreign Minister Rafael Ramirez said on the Telesur network. “We don’t believe in the free market. We must make an effort to reduce overproduction of oil.”
Asia discount
Kuwait offered the biggest discount to its Asian customers since December 2008, following Saudi Arabia and Iraq in reducing export prices. Kuwait Petroleum Corp will sell its crude at US$3.95 a barrel below a Middle East benchmark next month, the state-owned company said in a faxed statement yesterday.
Production in the US, the world’s largest oil consumer, expanded to 9.12 million a day through Dec 5, the Energy Information Administration (EIA) reported yesterday. That’s the fastest rate in weekly records that started in January 1983, according to the Energy Department’s statistical arm.
The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.
US crude inventories increased by 1.45 million barrels to 380.8 million last week, the EIA said. Stockpiles were projected to shrink by 2.7 million, according to the median estimate in a separate Bloomberg survey of eight analysts.
— By Ben Sharples
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