Oil prices boosted by Saudi Arabia’s vow to end glut

Oil prices took a hit earlier in the session, but recovered after remarks made by Saudi Arabia’s energy minister. Anadarko photo

Oil prices up over 1 per cent

Oil prices rose on Tuesday after Saudi Arabia’s energy minister said the kingdom is determined to end the global supply glut.  Prices were also buoyed by expectations of a drop in US crude stocks.

Up by 96 cents, Brent topped the $58 mark and sat at $58.33/barrel by the end of the session, while US WTI rose by 57 cents to $52.47/barrel.  The Canadian Crude Index was down 26 cents to $39.26/barrel.

Reuters reports that Saudi Arabia’s Oil Minister, Khalid al-Falih said the goal continues to be the reduction of crude inventories in industrialized nations to their five-year average.

Falih also hinted that there may be a prolonged restraint on output once the OPEC supply cut pact ends.

“When we get closer to that (five-year average) we will decide how we smoothly exit the current arrangement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories,” the minister, Khalid al-Falih, told Reuters.

Falih added that global oil demand is forecast to increase by 45 per cent by 2050, despite the push for renewable energy use.

Mark Watkins, regional investment manager at US Bank told Reuters that “OPEC continues to have their compliance cuts that are really in line.” He added “It’s providing stability which is definitely beneficial.”

As well, analysts are anticipating a drop in US crude inventories of about 2.5 million barrels.

Later on Tuesday, the American Petroleum Institute will release its data on US crude stocks and on Wednesday morning, the US Energy Information Administration will release its oil inventory data.

Oil prices took a hit earlier in the session after it was reported that crude flowing from Iraqi Kurdistan rose to 300,000 barrels per day (b/d) on Wednesday.  It is still short of the 600,000 b/d average, but has climbed from 250,000 b/d reported earlier this week.

Crude flow on the pipeline which takes oil from the Kurdistan region to Ceyhan in Turkey had been interrupted recently after Kurds voted overwhelmingly for independence from Iraq.

Iraqi forces have since retaken control of area oilfields from Kurdish fighters.