Traders Pump Up Prices As They Prepare To Dump

With the OPEC meeting just a month away and Saudi Arabia continues to push up production and manipulate other members, while Russia and Venezuela want to see production declines to help push up prices. Just a few days ago, S&P reduced Saudi Arabia credit rating. The Saudi economy is capable of withstanding any shocks caused by the current oil price slump, the World Bank’s Country Director for Gulf Countries Nadir Mohammed said.

Oil prices slumped dramatically in the second half of 2014, with prices halving from highs of above 100 US dollars per barrel in the first half of the year. Since then, prices have hovered around the 50-dollar mark. Saudi Arabia is the world’s biggest oil exporter. Brent oil climbed to 50.53 keeping pace with WTI. Oil prices were boosted by an industry strike in Brazil and force majeure for Libyan crude loadings.

Speaking to Asharq Al-Awsat, Mohammed said the Saudi economy was diversified enough to withstand current low oil prices and possessed highly competitive labor and investment environments due to its long-term growth prospects. Mohammed also said Saudi Arabia was the World Bank’s most important strategic partner in the Middle East, and that there were a number of joint projects between the organization and the Kingdom in various sectors.

The World Bank is committed to working with Saudi Arabia on a host of different projects and offering any technical assistance needed to keep the Saudi economy at its usual levels, he said. “The Bank currently provides a number of different technical assistance programs to all Gulf countries in order to help them meet the challenges which their economies face in general,” he said. He added, however, that Gulf countries were not in need of direct financial assistance from the World Bank, given that they all enjoy healthy national incomes.

The World Bank instead offers Gulf countries a number of joint initiatives to improve their financial services sectors, business planning programs, competitive intelligence, and investment environments. Such programs also include those related to social welfare, education, infrastructure, and labor, as well as food security, water, and energy.

West Texas Intermediate crude futures in New York rose more than 4% to as high as $48.35 per barrel. The US government weekly inventory report comes out tomorrow. Near-term oil prices are likely to continue in a range under $50 just as they have for weeks, noted Olivier Jakob, Petromatrix analyst.

“With flat prices not moving out of the range, we think that we will have to wait a few more weeks until the OPEC meeting to maybe find again some sustained momentum,” Jakob said of the Organization of Petroleum Exporting Countries, which has a regular meeting scheduled in Vienna Dec. 4.

Reuters reported that gasoline and diesel prices were also rallying, with US gasoline up nearly 6%, and ultra-low sulfur diesel up about 5%. Oil prices slipped on Wednesday after a big build in U.S. crude inventories which fed concerns that demand may not be enough to absorb one of the largest global surpluses in modern times.

The American Petroleum Institute on Tuesday reported a rise in U.S. commercial crude stocks of 7.1 million barrels to 473 million barrels in the week to Oct. 16, trumping expectations for an increase of 3.9 million barrels. Rising supply from the largest-producing countries, along with slowing demand from emerging nations, has cut the price of oil in half over the last year.