The end of the northern hemisphere summer season often sees a dip in oil demand and could coincide this year with much higher production from Saudi Arabia.
Advertisement
“With the United States rig count coming back online for several weeks, even if a (production) freeze did happen, we would be talking about freezing at higher levels of output”, Tariq Zahir, a crude oil trader at Tyche Capital Advisors in NY.
But the West Texas Intermediate (WTI) crude futures which declined to USD45.84 earlier in the morning, rose by 15 cents to USD46.73, while Brent crude futures were up 47 cents at USD49.70.
Some analysts, however, said using hard negotiating tactics could backfire on Riyadh. This news story is related to Latest/143423-Oil-dips-Asia-Saudi-Arabia-output-boost-reports/ – breaking news, latest news, pakistan ne.
The current record was established in July – 10.67 million barrels a day.
One source from outside OPEC said the Saudis were quietly telling the market that output could rise further in August to as high as 10.8-10.9 million bpd.
But the gains were mitigated somewhat as the US Energy Department data also showed a pickup in US crude production by 152,000 barrels a day, reversing a steady decline that had helped put a floor under world crude prices. Analysts predicted this figure to reduce by 0,742 million barrels.
Oil prices dropped to $27 per barrel in January from as high as $115 in mid-2014, hitting the budgets of oil exporters worldwide, including Saudi Arabia, and resulting in a record fiscal deficit for Riyadh.
Earlier this week, Oil Analyst at Morgan Stanley, Adam Longson, had said “oil prices reversal could begin mid this week, explaining that the recent oil price jump has been driven by traders covering bearish belt”.
Saudi Arabia refused to take part in any freeze unless its rival, Iran, agreed to do so as well.
Saudi Arabia will surely be the primary negotiator of any production freeze talks in September.
The Saudis are not alone in raising production.
Some analysts said countries such as Libya and Nigeria, whose crude production and exports were stunted by internal strife and militant attacks in the past few months, could also either ask for a special postponement or the right to freeze their output at the level of their maximum production potentials.
Advertisement
Many OPEC members have been hurt badly by a collapse in oil prices over the last two years. OPEC nations will gather next month to revive talks on freezing output.
