Khaleej Times

Oil sees a tumultuous week

Temporary production freeze disappoint­s investors looking for an output cut

- — AFP

Adel Al Jubeir, Saudi Arabia Foreign Minister

2.1m

If other producers want to limit or agree to a freeze in terms of additional production, that may have an impact on the market, but Saudi Arabia is not prepared to cut production

The oil market was gripped last week by an output freeze deal between the world’s top two producers Saudi Arabia and Russia.

Prices initially rebounded on Tuesday, before hitting reverse as traders assessed the conditiona­l agreement between Saudi Arabia and Russia and two other producers to limit output.

In a bid to stabilise an oversuppli­ed market, Russia and Opec members Saudi Arabia, Venezuela and Qatar announced on Tuesday that they had reached a preliminar­y deal to freeze output at January levels, provided that other major producers followed suit.

The news sparked hopes the market would stabilise after sinking to near 13-year lows the week before on the stubborn supply glut — but disappoint­ed those looking for an output cut.

“It has been another tumultuous week for oil markets last week after ... newsflow has pointed to a potential resolution to the ongoing supply glut,” said analyst James Hughes at traders GKFX.

“Undoubtabl­y the biggest story of the week was the news that Saudi Arabia and Russia had agreed to freeze production ... however, the obvious problem with that is that we are already at record highs for oil production.

“The news saw oil prices jump higher, before dropping on the prospect that Iran and Iraq were not on board.”

Saudi oil minister Ali Al Naimi said Tuesday’s decision was “the beginning of a process which we will assess in the next few months and decide whether we need other steps to stabilise... the market.”

Iran meanwhile entered talks with other producers to address low prices — but stopped short of committing itself to any production cutbacks.

Iran, which has been pumping oil at maximum levels since a deal with Western powers ending sanctions, said in response to the freeze announceme­nt that “there is room for discussion” but oil minister Bijan Zanganeh added that Iran “won’t relinquish” market share.

The 13-nation Opec, of which Saudi Arabia, Venezuela, Qatar and Iran are members, has refrained from cutting output as it looks to maintain market share in the face of competitio­n from US shale oil producers.

Russia — which is not an Opec member — has seen its recessionh­it economy damaged further by the slump in oil.

Oil prices also ran out of steam

barrels of oil increased in US commercial crude inventorie­s a week earlier

on Thursday and Friday after the US Department of Energy said US commercial crude inventorie­s rallied 2.1 million barrels the week before to reach the highest level in more than eight decades. An inventorie­s rise suggests soft demand in the world’s biggest oil consumer and is bad news for a market wallowing in excess supply.

Saudi foreign minister Adel Al Jubeir meanwhile rejected any reduction in his country’s crude output. “If other producers want to limit or agree to a freeze in terms of additional production, that may have an impact on the market, but Saudi Arabia is not prepared to cut production,” Al Jubeir told AFP.

In early afternoon deals on Friday, US benchmark West Texas Intermedia­te for March delivery slid 81 cents to $29.96 a barrel. Brent North Sea for April dipped 77 cents to $33.53 per barrel compared with Thursday’s close.

 ??  ?? A worker walks past an oil installati­on operated by Venezuela’s state oil company PDVSA. Venezuela was among the four countries that reached a preliminar­y deal last week to freeze output at January levels, provided that other major producers followed...
A worker walks past an oil installati­on operated by Venezuela’s state oil company PDVSA. Venezuela was among the four countries that reached a preliminar­y deal last week to freeze output at January levels, provided that other major producers followed...

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