Saudi’s Try To Justify Low Prices & High Production

Crude oil added 38 cents in the morning session to trade at 44.66 on the hopes of Chinese stimulus after reports showed that exports and imports tumbled last month. Brent oil matched WTI’s climb trading at 48.56. Crude traded higher on Monday, recovering from a three-day decline, but gains were capped by a firm dollar after robust U.S. employment data fueled bets for an interest rate hike before the year is over. The dollar held near its highest level in almost seven months versus a basket of currencies after U.S. nonfarm payrolls jumped 271,000 in October, far exceeding the 180,000 increase that economists polled by Reuters had predicted.

The dollar’s strength is likely to extend ahead of a likely rate increase by the Federal Reserve in December, and could be a key drag on prices of oil and other commodities. A stronger greenback makes dollar-priced assets more costly for buyers using other currencies.

Trade data from China, the world’s second-largest oil consumer, showed the country’s crude oil imports fell 5.7 per cent from the previous month to 26.35 million tonnes in October. China’s imports of other commodities such as iron ore, copper and coal also fell last month as disruptions from the National Day holiday were compounded by slower demand.

U.S. crude oil moved higher on Monday after tumbling 2 percent in the previous session as the dollar climbed on robust U.S. employment data which raised bets for an interest rate hike this year.

The discount for prompt U.S. crude futures fell to its deepest level in six months on Friday, as traders sold off December positions amid bearish indications in physical crude markets.

A year after the price of crude went into free fall; the Kingdom of Saudi Arabia has said that it has no plans to reduce oil drilling. Saudi officials said they see no reason to slow the supply of oil in advance of an international producers’ meeting in December. Khalid al-Falih, chairman of the Saudi Arabian Oil Company, or Saudi Aramco, said in an interview, “The only thing to do now is to let the market do its job,” indicating that the country has no intention of providing reprieve to the battered global oil industry. The news isn’t likely to help the price of crude escape from below $50, where it has held steady for most of 2013.

OPEC shook markets in November 2014 with its decision to keep production unchanged, allowing the price to fall from a 2014 high of $115 a barrel to lows around $45 in 2015. International investments in drilling have dried up as active U.S. rig counts fell by more than 1,000 in the past year. While the Saudis had limited supplies in years past to help stabilize oil prices, the new policy has helped Saudi oil claw back market share it lost as U.S. production boomed in 2014. Saudi officials said the policy will be proved sensible in one to two years, as global growth returns and demand picks up to match the outsized supply. They predicted that oil will return to $70-$80 per barrel around 2017.

Oil demand will soon reflect the “attractiveness” of the current level of crude prices, and Asia will be a vital engine of economic expansion for decades, Saudi Oil Minister Ali al-Naimi said. OPEC’s chief joined him in seeing Asia as the main hub for growth. Oil demand in Asia will rise by about 16 million barrels a day to almost 46 million by 2040, Abdalla Salem El-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said in an article posted on the International Energy Forum’s website. The region will need to import 40 million barrels a day of crude oil and refined products by then, he said.