Saudis Work To Stem Post-Meeting Price Surge
Crude markets responded somewhat positively to Saudi Arabia’s decision to meet full customer requirements in October when Saudi Aramco’s lifting program became known on September 12th.
The markets had flatly rejected OPEC’s September 10th announcement of a production boost of 800,000 b/d, with West Texas Intermediate (WTI) gaining $1.51 a barrel on September 11th to close at $35.14, after hitting a post-Gulf War high of $35.85.
However, the news that many of Saudi Aramco’s U.S. and European crude term customers received 100 percent contract volumes for October – and the remainder being allocated more than 90 percent of their contract volumes – helped crude prices in the U.S. shed about 65 cents by midday on September 12th.
Bullish sentiment among traders about the most recent OPEC production hike and renewed worries about the group’s capacity limitations, as well as product shortages in the U.S., was raising talk among traders of the possibility of $40 – and even $50 a barrel oil -- in the winter months. Several OPEC ministers unwittingly stoked these fears.
Venezuelan Oil Minister Ali Rodriguez, the current OPEC president, said on September 11th that: “We are approaching a crisis of great proportions because oil production capacity is reaching its limit. I don’t think prices are going to get there now, but they could rise to $40 depending on the winter.” Iranian Oil Minister Bijan Namdar Zanganeh warned that: “This is all we can do. All the tools are not in our hands.”
Saudi Oil Minister Ali Naimi, who had been quoted as saying on September 11th that he was “not happy” about the market response to the 800,000 b/d boost, attempted to counteract the comments from his Venezuelan and Iranian counterparts on September 12th.
In an interview with the Arabic newspaper, al-Hayat, Naimi sought to reassure markets that the kingdom could tap into its spare capacity fairly quickly, saying that the kingdom could raise its output to 10.5 million b/d within 90 days.
( oilnavigator )