By November 9, 2017 0 Comments Read More →

Oil prices up on Saudi supply cuts, political tensions

oil prices

Oil prices rose slightly on Thursday, mostly due to news out of Saudi Arabia. Encana photo.

Oil prices “may have reached a short-term peak”: Analyst

Oil prices rose slightly on Thursday on Saudi Arabia’s proposed export cuts for next month as well as political unrest in the kingdom.

Brent crude was up by 56 cents to $64.05/barrel by 1:32 p.m. EST and US WTI rose 50 cents to $57.31/barrel.  The Canadian Crude Index rose to $42.74.

“The move is driven by developments in Saudi Arabia in recent days and anticipation that the consolidation of power by King Salman and the Crown Price will continue,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics told Reuters. He added “Meanwhile, Saudi comments on Lebanon have also highlighted rising tensions between the kingdom and Iran.”

A spokesman for the Saudi energy ministry told Reuters that Saudi Arabia plans to cut crude exports by 120,000 barrels per day (b/d) in December compared with November.

Allocations to all regions will be cut.

A number of traders told Reuters another factor impacting oil prices were unconfirmed rumours that Saudi King Salman will relinquish the throne to his son, Crown Prince Mohammed Bin Salman.  In September, similar rumours were heard, but were unfounded.

Earlier in the week, prices were buoyed after the Saudi crown prince arrested a number of ministers, investors and royals in a so-called corruption crackdown.  Critics say the move is actually a power grab by the younger royal.

Crown Prince Salman said he is determined to remodel conservative Saudi Arabia into a modern state that is no longer dependent on oil.

Mid-East analysts say the crown prince’s ascendancy to the crown will add to tensions between the kingdom and a number of countries, including Iran, Lebanon and Yemen.

As well, some traders are cautioning that the recent rally that pushed Brent prices up by over 40 per cent since July may have run its course.

“Prices may have reached a short-term peak,” Fawad Razaqzada, analyst at futures brokerage Forex.com told Reuters.

“It doesn’t matter how bullish the fundamentals are … when an asset goes vertical there is always room for a pullback and consolidation of recent price moves,” Greg McKenna, chief market strategist at brokerage AxiTrader, said while speaking with Reuters.

Analysts and traders are looking forward to the Nov. 30 OPEC meeting in Vienna where participants in the cartel’s supply cut pact will discuss extending the agreement to the end of 2018.

Should participants agree to extend the pact, “prices may become stronger and temporarily reach the $65-$70 per barrel range in 2018,” said energy consultancy FGE.

But, rising US crude production may impede oil price increases.  According to the US Energy Information Administration, US oil output rose by 67,000 b/d to 9.62 million b/d last month.

And, with 997 more oil and gas drilling permits issued in Texas last month, output looks sure to rise even further.

 

Posted in: Energy Financial

Post a Comment