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Oil prices jump on assumption of Saudi output restraint

Oil prices

Oil prices rose on Monday after a rough trading day on Friday. Analysts are optimistic that with the Saudi Aramco IPO opening up next year, Saudi Arabia will continue to support prices. Reuters photo by Thomas Peter.

Oil prices will be supported by the Saudis, especially until Aramco IPO next year: Analysts

After a 2 per cent drop on Friday, oil prices rose on Monday on expectations that Saudi Arabia will continue to support prices by cutting its production and after data released showed the number of  drilling rigs in the United States fell last week.

Benchmark Brent settled by 82 cents to $56.61/barrel and US WTI jumped by $1.34 to $50.92/barrel.  Western Canadian Select dropped by $1.38 to $38.54/barrel.

Gulf Coast oil refineries shut down ahead of Hurricane Nate late last week planned to reopen on Monday as the storm moved inland, away from most of the energy infrastructure on the US Gulf Coast.

OPEC Secretary-General Mohammad Barkindo said producers’ efforts to rebalance the oil market are succeeding, however, more steps may be needed if the market is to remain steady into 2018.

“There is a growing consensus that, number one, the re-balancing process is underway,” Barkindo told World Oil after meeting with Indian’s Oil Minister Dharmendra Pradhan. “Number two, to sustain this into next year, some extraordinary measures may have to be taken in order to restore this stability on a sustainable basis going forward.”

Barkindo did not elaborate, but according to Reuters, analysts said if the Saudi’s would continue to support the market by restraining their output, crude prices would likely not fall any further.

Saudi Arabia is planning to offer about 5 per cent of its global oil major Saudi Aramco in an initial public offering next year.

“We remain fairly confident that the Saudi’s will look to continue to support the oil market, especially until the sale of Aramco,” said Shane Channel, equity and derivatives adviser at ASR Wealth Advisers.

According to World Oil, UAE Energy Minister Suhail Al Mazrouei tweeted that he hopes that at OPEC’s next meeting, the cartel and non-OPEC members participating in the supply cut pact will find a consensus on balancing the market in 2018.

On Friday, General Electric Co’s Baker Hughes reported the number of US oil rigs fell by two to 748.

 

Posted in: Energy Financial

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