Saudi Arabia Comments Send Oil Traders On Roller Coaster Ride

Crude oil gained 23 cents in the morning session and is trading at 41.98 after a crazy trading day on Monday. Brent oil gained 7 points to reach 45.05. Crude oil prices ended mixed on Monday. Supply worries offset Saudi Arabia’s pledge to work on price stability. Brent settled up 17 cents at 44.83 a barrel, while US crude finished down 15 cents at 41.75.

Optimism by crude oil exporters on improved trade waned yesterday as prices of the commodity fell later in the day, releasing fleeting gains made after the Saudi Arabian cabinet reiterated its commitment to work with other producers, as a firm dollar and concern over global oversupply reasserted themselves. Prices rallied briefly after Saudi Arabia said in a statement the kingdom remained ready to work with other producing and exporting countries to stabilize prices.

Oil prices have halved over the last 12 months after OPEC decided to maintain its production levels, or even increase them, to retain market share, in part by forcing higher-cost producers elsewhere to cut output. Saudi Arabia has previously said it was willing to cooperate with other oil producers to maintain oil price stability, but the comments on yesterday arrived as futures prices were barely holding above 2-1/2 month lows.

Big hedge funds have increased their bets that oil will continue to fall, according to data from the U.S. Commodity Futures Trading Commission (CFTC) last week. Speculators now hold more positions that are betting on a drop in the oil price than at any time since at least 2009, according to Reuter’s data.

Morgan Stanley’s commodities research team said they expected to see a rise in the physical market towards the end of the year, as refinery margins remain robust and maintenance schedules for next month are expected to be light.

Oil prices climbed this morning ahead of a key meeting of the OPEC oil cartel in early December and a report on US commercial crude inventories to gauge demand in the world’s biggest oil consuming nation. It was just one year ago this week that Saudi Arabia and OPEC declared war on US and Canadian shale producers.

Analysts said the impact of comments by the Saudi Arabian oil minister that his country was prepared to work with other oil producers to stabilize prices was muted because there was no firm signal to slash production to ease the glut in global crude supplies.

Saudi Arabia led a shift by the Organization of the Petroleum Exporting Countries in November 2014 to defend market share against competing supplies, rather than cut output to prop up prices.  Saudi’s cabinet said yesterday it was ready to cooperate with OPEC and non-OPEC countries to achieve market stability, days before OPEC meets to review its year-long policy of not supporting prices. On Sunday Venezuelan oil minister said OPEC cannot allow an oil price war and must take action to stabilize the crude market soon