Oil Prices Rebound As Saudis Expect Reduced Exports In August

Lloyd Doyle
July 23, 2018

Under pressure from President Donald Trump, Saudi Arabia has rushed to increase oil production - only to discover that global markets might not yet need it.

Futures in NY rose 0.9 percent after gaining 2.1 percent in the prior three sessions.

Oil prices rose on Friday as a weakening dollar and lower expected August oil exports from Saudi Arabia supported the market, offsetting concerns about U.S.

Crude has retreated by nearly 6 percent this month as the prospect of a tit-for-tat trade war between the USA and China has rattled global financial markets.

He also said concerns that Saudi Arabia and its partners are moving to oversupply the market substantially are "without basis".

West Texas Intermediate crude for August delivery, which expires Friday, rose 37 cents to $69.54/bbl at 11:33 a.m. local time on the New York Mercantile Exchange. Total volume traded was about 38 per cent below the 100-day average. Brent crude for September settlement rose 49 cents to $73.07 on the London-based ICE Futures Europe exchange. Prices on Thursday dropped US$0.32 to US$72.58.

After a hard 2017 in which Saudi Arabia's economy contracted by 0.7 per cent year-on-year, the economy began to recover in the first quarter of 2018, growing by 1.2 per cent year-on-year compared with a 1.2 per cent fall in the fourth quarter of 2017. The global benchmark traded at a $4.81 premium to NYMEX WTI Crude for the same month. The more-active September contract slipped 0.2% to $68.11.

Lower oil demand in the United States and China caused by an economic slowdown due to the trade spat between the two countries would likely weigh heavily on markets, some analysts said.

However, the details that Saudi will increase its production at what kind of speed are not mentioned yet, so Saudi's commitment that they will raise outputs is still an uncertainty now, another point that we have to pay attention to is that, due to the deterioration of the Venezuelan economy in April and March this year, its daily outputs of crude oil declined from 2.5 million barrels to less than 1.5 million barrels per day.

Prices for "black gold" of reference marks in the course of trading are rising after the statements of the delegate of Saudi Arabia to OPEC that world oil reserves in the second half of the year will fall significantly.

The kingdom initially planned record output of 10.8 million barrels per day, people briefed on output policy said last month. The oil and gas rig count now stands at 1,052-up 100 from this time past year.

Decline in refinery utilization rates, as well as oil exports, which had dropped last week to the lowest level since April, contributed to the inventory build.

While the forecast growth represents a significant uptick compared with the 0.7 per cent contraction in 2017, "we caution that growth will remain well below the 5.3 per cent annual average seen between 2010 and 2014, before the slump in oil prices", BMI added.

Other reports by Iphone Fresh

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