With front month West Texas Intermediate (WTI) cruising to new post Gulf war heights and breaching $37 a barrel, Saudi Oil Minister Ali Naimi sought to reassure oil markets on September 18th that price relief is just around the corner.
Referring to OPEC’s September 10th decision to boost its output by 800,000 b/d, Naimi said that: “We want to let the impact of the new increment take effect. It is already in the process.” The Saudi oil minister added that: “Many of the customers who have nominated have already got their allocations and will be lifting from October 1st onwards.
” He noted that OPEC’s 3 percent production boost on September 10th, the oil cartel’s third production increase this year, points to the fact that global crude supplies are now ample. “Certainly the increment of 3.2 million b/d since March is above the forecast for growth in demand. This oil is going somewhere. I believe it is building inventories,” Naimi said.
Meanwhile, a Saudi source also sought to provide the markets with encouraging words on September 18th, saying that the oil cartel would act to add more barrels into world markets before its November 12th conference if it was justified. According to the source, “If prices stay as high as they are, there is no doubt that OPEC will reach an agreement to increase production.”
He was referring to the OPEC price band mechanism, which would trigger a 500,000 b/d increase if the price for OPEC’s basket of crudes is maintained over $28 a barrel for 20 consecutive working days. OPEC already had the price band mechanism triggered on September 8th, but as prices have not fallen, the countdown has begun again.
( oilnavigator )
