Crude Oil prices have moved up again today, as supply worries persist despite Saudi Arabia’s promise to raise daily output by a quarter to full capacity if necessary.
West Texas and Brent crude both dropped by 2 per cent yesterday after the world’s top oil exporter said available supply was well above demand and current high prices were unjustified given the state of the global economy.
Recent reports also note that Saudi Arabia planned to send out a fleet of supertankers carrying over 22million barrels of oil, the largest such shipment in memory. Mounting geopolitical over Iran’s nuclear program which has led to oil sanctions against the country and ongoing concerns about political unrest in the Middle East and North Africa have caused prices to spike this year.
IMF Director Christine Lagarde warned earlier this week that an oil price shock could threaten economic recovery and that supply disruption would have “serious consequences”.
Yesterday, Saudi oil Minister Ali al-Naimi said the kingdom had met all its customers’ requests for oil and it stood ready to raise output from a current 9.9million barrels a day (bpd) to full capacity of 12.5million if needed.
“My only mission is to convey to you that there is no supply shortage in the market,” he said at a briefing in Doha, Qatar. “We are ready and willing to put more oil on the market, but you need a buyer”.
And he added:
Oil prices today are unjustifiable on a supply and demand basis. We really don’t understand why the prices are behaving the way they are.
Saudi Arabia’s comments show how the country is trying to ease the geopolitical premium in the market with the tensions with Iran.
Another aspect that can put pressure on the energy market is a release of crude from the Strategic Petroleum Reserve, which has been talked about since last week. Reuters erroneously reported last week that President Obama and Prime Minister Cameron had decided to release reserves, which drove the price of crude oil down to 103.00 in just minutes. The White House immediately denied the story and Reuters, later retracted the story as crude oil returned to trade over 106.00
President Barack Obama is scheduled to visit an oil hub near Cushing, Okla., the delivery point of Nymex oil, and markets would not be surprised to see the administration announce a release of crude oil said a report in MarketWatch today.