TODAY.AZ / Business

Oil prices fall amid dampened prospects of output freeze

26 August 2016 [16:45] - TODAY.AZ

By Azernews


By Nigar Abbasova

World oil prices fell on August 26 amid the statement of the Saudi energy minister on the lack of necessity in interventions in “black gold” market.

International benchmark Brent crude October futures were trading at $49.46 per barrel, down 21 cents from their previous close, CNBC reported. U.S. West Texas Intermediate (WTI) crude September futures stood at $47.23 a barrel, recording a decrease of 10 cents.

The price of a barrel of Azeri Light crude oil decreased by $1.23 to stand at $49.81 on the world markets, on August 25.

The daily basket price of OPEC basket of fourteen crudes stood at $ 45.28 a barrel on August 25, recording an increase of $0.03, as compared to the previous index of $45.25.

Saudi Arabian Energy Minister Khalid Al-Falih said that the market is moving in the right direction, stressing that there were no specific discussions in OPEC on the issue of oil freeze. 

“We don't believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us," the minister told Reuters. 

Comments of the minister put a restraint on expectations of a meaningful intervention into the market, the issue that has become topical due to oversupply in the market for more than two years. The statement negatively affected the market and even strengthened skeptical attitude of some traders to the outcome of the forthcoming meeting, scaling up expectations on a repeat of the Doha meeting, when participants failed to make any agreement. 

Members of the Organization of Petroleum Exporting Countries (OPEC) will meet on the sidelines of the International Energy Forum (IEF), which is scheduled for September 26-28, where OPEC members and non-OPEC members are expected to discuss the market situation, including the issue of putting ceilings on oil production to stabilize prices in the market.

Nevertheless, some analysts say that a proposed oil production freeze at current near-record levels is not expected to significantly influence the situation in an oversupplied market and bring supply and demand back into balance.

"I do not expect the OPEC meeting in September to agree any freeze or affect the oil market in any significant way. This is because it appears that key OPEC members remain more concerned about market share," said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore.

Meanwhile, OPEC’s Secretary General Mohammed Barkindo told Al Hayat pan-Arab daily that there is a growing understanding inside and outside the oil producers' group that action is needed to manage crude production as market forces are not enough to correct prices.

"There is growing realization within OPEC and outside that producers, inside and outside must take more proactive stands in relation to production management in order to complement traditional market force," he said.

Barkindo criticized the approach of non-intervention, underlining that oil producers (members of the cartel) are suffering from the current level of prices, which deprives producers of income worth about $1 trillion.

"We have seen where non-intervention in prices since 2014 has led," he said.

Iran’s Oil Minister Bijan Namdar Zanganeh has recently announced that he would take part in the Algeria meeting.  The country expressed its willingness to cooperate with other producers to stabilize oil markets, but added that it expected others to respect its individual rights.

Zanganeh also said that Iran supports any action by oil producers aimed at market balance, but the country has the right to continue reviving its share on the international oil markets.

"When the glut in the market started, Iran's output and exports were roughly at 2.7 million barrels per day (mbd), and those who disrupted the market balance with increasing their output should take responsibility and cut the production," Shana quoted him as saying.

Reuters reported earlier that Iran, OPEC’s third-largest producer “is sending positive signals" that it may support joint action to prop up the oil market, potentially aiding efforts to revive a global deal on freezing production levels at talks next month.

Many observers, however, interpreted the statement of Zanganeh as Tehran saying it would continue to try and regain market share by raising output, following the lifting of sanctions against it in January 2016.

Oversupply resulted in the sharp decrease of oil prices sending them from $115 per barrel in 2014 to as down as $27 in January 2016, which is considered to be the weakest price since 2003. The prices recovered and averaged $50 amid global production outages from Canada (due to wildfire), Libya and Nigeria ( due to attacks on oil facilities)  but then fell again towards $40 in July.

URL: http://www.today.az/news/business/153688.html

Print version

Views: 1647

Connect with us. Get latest news and updates.

Recommend news to friend

  • Your name:
  • Your e-mail:
  • Friend's name:
  • Friend's e-mail: