Oil prices jump as Saudi Arabia promises to trim exports; US supplies also seen falling
London, UK - Oil prices jumped on Tuesday as Saudi Arabia promised deep cuts to crude exports next month while the US shale boom showed signs of slowing.
Futures in New York rose 2.3 per cent, the biggest gain in more than a week. Saudi Arabia will cap shipments at 6.6mn barrels a day in August, 1mn lower than a year earlier, said Saudi Arabia’s Energy and Industry Minister Khalid al Falih. In the US, Halliburton Co and Anadarko Petroleum Corp signaled that the investment in shale fields may finally be succumbing to the oil price slump.
Oil remains in a bear market amid concern rising global output will offset curbs by members of the Organization of Petroleum Exporting Countries and its allies. While the Saudi comments at talks with oil producers in St Petersburg, Russia on Monday helped lift prices, the same meeting agreed to let Nigeria and Libya continue boosting production, slowing the market rebalancing.
“Yesterday’s (Monday) Saudi decision to cut exports still lingers in the market,” said Bjarne Schieldrop, chief analyst for commodities at SEB Markets. The headlines that the US shale oil boom is easing are also driving futures higher, he said.
West Texas Intermediate (WTI) for September delivery climbed by US$1.02 to US$47.36 a barrel at 9.26am on the New York Mercantile Exchange. Total volume traded was about three per cent above the 100 day average. Prices rose 57 cents to US$46.34 on Monday.
Brent for September settlement climbed as much as 95 cents, or two per cent, to US$49.55 a barrel on the London-based ICE Futures Europe exchange. Prices rose 54 cents to US$48.6 on Monday. The global benchmark crude traded at a premium of US$2.26 to WTI.
Saudi Arabia won’t act alone to balance the market and other nations should improve their implementation of supply cuts, Falih said on Monday. When OPEC holds its next full ministerial meeting in November, it may need to discuss extending the supply cuts for longer, United Arab Emirates Minister of Energy Suhail Al Mazrouei said in a Bloomberg television interview.