For the second day in succession, Oil price rose extending the biggest rally since October 2012. Saudi Arabia said that it is not cutting down production and is confident that crude prices will rebound as the world economy grows.
Brent futures rose by 2.6 percent in London. Saudi oil minister blamed countries outside OPEC and their uncooperative attitude for the present problems. According to Qatar’s energy minister Mohammed Al Sada, the market is oversupplied by 2 million barrels a day.
Oil prices has slumped by about 20% ever since OPEC refused to cut production regardless of the fact that US is pumping crude at a record pace.
The energy minister of the United Arab Emirates, Suhail Al Mazrouei, has described the excess supply of crude by Non-OPEC countries as irresponsible actions which has led to the fall in oil prices.
Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone today, “We can expect more persuasive talk to try and get prices back to a happy median. A good balance for the market is $70. We’re coming into the Christmas period of low liquidity, so expect volatility and fluctuations to continue.”
The oil production in US, which also is the world’s biggest oil consumer expanded to 9.14 million barrels a day through Dec. 12, according to the Energy Information Administration. This is record level in weekly data since January 1983.
The US Shale boom is driven by new innovative technologies like horizontal drilling and hydraulic fracturing. This has led to the unlocking of supplies from shale formation from regions such as Eagle Ford and Permian in Texas and the Bakken in North Dakota. According to the figures released by the industry-funded American Petroleum Institute, these three shale locations has supplied record amounts of crude in November.
China, a major oil consumer has increased crude imports from Russia and stood at 3.31 million metric tons in November. This is a 65% growth from a year ago. On the other hand Saudi shipments shrank by 5.9% as compared to last year. Similarly Iran shipments also fell by 2.6%.