Oil resumes fall as Saudi Arabia repeats readiness to cooperate
LONDON (Bloomberg) -- Oil fell after briefly climbing on Saudi Arabia’s repeated pledge to work with OPEC and other producers to stabilize global oil markets.
West Texas Intermediate rose as much as 2% following a report by the Saudi Press Agency. Barclays Plc said the statement doesn’t reflect any policy shift by Saudi Arabia, the biggest member of the Organization of Petroleum Exporting Countries, which is due to meet Dec. 4. The kingdom’s oil minister, Ali al-Naimi, made similar comments last week.
"The Saudis have said numerous times that they are willing to work with both OPEC and non-OPEC producers," Bob Yawger, director of the futures division at Mizuho Securities USA in New York, said by phone. "We were getting killed when the statement came out and prices quickly turned around. As it became clear that this was nothing new, the market returned to negative territory."
Oil has slumped about 45% over the past year amid speculation a global glut will persist as OPEC continues to pump above its collective quota. The organization has signaled since last year that it would only reduce output to remove the surplus if producers outside the group shared the burden.
WTI, Brent
WTI for January delivery fell 64 cents, or 1.5%, to $41.26/bbl at 9:21 a.m. on the New York Mercantile Exchange. It earlier dropped as much as $1.49 and climbed as much as 85 cents. The December contract expired Friday after falling 0.4% to $40.39, the lowest settlement since Aug. 26. The volume of all futures traded was more than double the 100-day average.
Brent for January settlement slipped 14 cents, or 0.3%, to $44.52/bbl on the London-based ICE Futures Europe exchange. The European benchmark crude traded at $3.26 premium to WTI.
“It’s hard to see what else moved the price besides the Saudi statement, even though it’s exactly what Oil Minister al- Naimi said last week,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “For me there’s nothing new, but the OPEC meeting is approaching and participants might prefer to close their short positions.”
Closing Positions
The price jump following the Saudi statement probably reflects that traders have acquired substantial short positions and are inclined to close these on bullish news, according to UBS. Short positions in Brent crude taken by speculators are at the highest level since October, at 141,387 contracts, according to data from ICE Futures Europe.
“They have always said they would cooperate if non-OPEC joins,” Miswin Mahesh, an analyst at Barclays in London, said by email.
Oil fell earlier amid a broader commodity rout while Venezuela predicted prices may tumble to the mid-$20s/bbl unless OPEC tackles the global surplus. Venezuela is urging the group to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Oil Minister Eulogio Del Pino said Sunday.
OPEC meets Dec. 4 in Vienna to discuss the production ceiling. Member nation Iran has signaled its intention to boost output by 1 MMbpd within five to six months of economic sanctions being removed.
