“Crude oil imports should be well supported by the completion of new storage facilities by independent oil players in China, as authorities open up the refining sector”, ANZ analysts said of China in a note. “The USA, Russian Federation and OPEC combined produce more than 50% of global crude, and output from these producers has increased over 2015 despite weakening production in the U.S.”, it added. At Multi Commodity Exchange, crude oil for delivery in December rose by Rs 30, or 0.99 per cent, to Rs 3,073 per barrel, in a business turnover of 592 lots. Experts underlined the need for what they said was a deeper understanding of causes of oil price fall rather than focusing on demand and supply factors.
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The global producers’ cartel OPEC shook markets in November 2014 with its decision to keep production unchanged, allowing the price to fall from a 2014 high of $115 a barrel to lows around $45 in 2015.
CRUDE oil prices edged up on Friday after falling over 2% the previous session, with analysts saying oversupply and a strong dollar would continue to weigh on fuel markets. Growth in Asia’s demand may slow “by efforts to efficiency enhancement and oil substitution”, he said in the remarks.
Prince Abdulaziz said a prolonged period of low oil prices was unsustainable, warning it could “reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise”.
Saudi Arabia itself has serious cash flow problems.
Even a fresh round of interest rate cuts by Beijing October 23, days after the European Central Bank President Mario Draghi signaled the possibility of another large stimulus package in December for the Eurozone, failed to ignite a rally in oil futures.
“These measures validate our belief in the strength of the long-term fundamentals of energy markets, and demonstrate the importance that Saudi Arabia attaches to maintaining its oil export capability and spare capacity”.
Still, the longer term outlook on China’s oil demand remains cloudy as the country’s economy transitions away from one reliant on heavy industry to a more service-based one.
Oil demand is expected to be 94 million barrels a day this year, rising 1.5 per centfrom last year, with about 2 million barrels a day of spare capacity, mainly held in Saudi Arabia, he said in the prepared remarks.
“This is one of the few industries in the world that is operating at such a thin cushion”.
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Saudi oil minister Ali al-Naimi on Sunday said demand for oil worldwide would soon reflect the attractiveness of current prices, noting Asia as key to the growth.
