• Saudi Arabia's commitment to address the abundant supply stimulates oil price growth


    The International Platts Agency for Oil Information emphasized that crude oil markets are heading towards resuming the price gains after several consecutive sharp declines. It noted that the signs of this began at the end of last week on limited gains. This recovery is due mainly to Saudi Arabia's full commitment to address the increasing world oil supply in the markets, which stimulated the price growth again.

    In the report, Khalid Al-Falih (Minister of Energy, Industry and Mineral Resources) highlighted the importance of achieving orderly transition to a more secure and sustainable future for energy. He stressed the importance of the cooperation between all parties and organizations in achieving rational vision of future energy policy in order to attain energy security and encourage the protection of the environment. This could be done through meeting the challenges of climate change, which would help to promote economic prosperity, both in developed and developing countries.

    A recent report by the International Renewable Energy Agency said that Al-Falih's statements helped to offset the impact of the worrying outlook in the latest report of the International Renewable Energy Agency. As the Agency warned that shale oil production in the United States would exceed global growth in demand for crude oil this year.

    The US crude oil production averaged 10.271 million barrels per day in the week ending Feb. 9, the highest level ever, according to data from the Energy Information Administration since 1983. The report pointed out that the American Basin of the United States tops and leads most of these gains so far. It added that the recovery of the financial markets and the return of stock prices and the weakness of the dollar were among the main reasons behind the rise in energy last week. Inflation fears - apparently - have temporarily declined and volatility has fallen to more bearable levels.

    The report quoted from analysts at BP that saying all major currencies rose by at least 2 per cent against the US dollar during the past week. As a result of that, the dollar index was down by 2.3 percent, leading to the biggest weekly loss since 2015. It pointed out that the weakness of the dollar supports the rise in oil prices according to the inverse relationship between them. The report mentioned that this decline in the dollar helped to push crude oil futures to a three-year high late last month.

    As the stock market stabilizes, the relationship between oil and the dollar can re-emerge as a major operator of price and market movements. The recent rise in inventories has helped to boost market concerns of the expanding increases in American production. The report expected that the US oil production exceeds a record high and is likely to record the level of 11 million barrels per day at the end of this year.

    The report added, "the most important obstacles facing the US production are the infrastructure, the need to develop pipelines, ease restrictions in ports, and increase capacity in the refining industry." It pointed out that raising the level of efficiency and reliance on advanced technologies continuously reduces the prices of economic parity in rock production. The growth of demand in the future helps to absorb more production in the international markets.

    The Organization of the Petroleum Exporting Countries (OPEC) will host a new meeting on March 16 with the International Energy Agency and the World Energy Forum as parts of a series of joint contacts to complete the consultations of the Riyadh meeting that happened a few days ago. The OPEC report said, "The meeting will include the formation of specialized joint workshops to further explore the evolution of global energy policies, research of energy technology tracks, the classification of fuels in regional and global stocks, and the discussion of recent data and statistics on energy resources and their revisions."

    The report pointed out that the new meeting between the three international organizations would be enhancing the communication at the level of analysts, reporting on the revisions of important data and methodological issues, taking advantage of the latest information technology. There are to strengthen interactions on the developments of physical and financial energy markets, and to find ways to study the relationship between them.

    The international report stressed the need to achieve an ongoing commitment to global dialogue to enhance energy security worldwide in light of the changing landscape of conditions and the circumstances of energy resources through studying the changing energy needs across different regions. It considered the dialogue between governments and industry stakeholders on global policy objectives, investment requirements, and a market solution is vital for the world to achieve energy security.

    The report noted that OPEC, the Energy Agency, and the Energy Forum will remain fully committed to achieving greater data consistency, improving energy expectations, and facilitating co-operation and information sharing in order to facilitate agreement in the market.

    It also said that the comparison between the expectations of the three organizations will become easier in the coming period and will reduce the differences and estimates of the market in the light of enhanced dialogue on the diverse views of producers and consumers. It pointed to the continued convergence of views and expectations of the International Energy Agency and OPEC in the short, medium and long term, which led to improve data results and reduce the variability of estimates.

    The report noted that the three organizations are currently focusing on studying shifts in global energy demand patterns and exploring the role of unconventional production and its flexibility in OECD countries and beyond, particularly investments in non-traditional resources, especially shale oil and gas.

    The report quoted Mohammed Barkindo (Secretary General of OPEC) as he was stressing the importance of promoting mutual understanding among the various energy organizations, pointing out that these efforts are a high priority for OPEC because the global oil market is increasingly complex and interdependent and one party alone cannot tolerate the burden. He urged that cooperation and dialogue are vital. The process of transition to more sustainable and secure energy systems requires extensive coordination and intensive collective efforts to achieve this desired and enhanced goal for the market, industry and global economy in general.

    Oil prices rose slightly at the close of last week ending the week on gains, supported by the recovery of global stock markets and the weakness of the US dollar, which helped the crude to recover from a sharp decline last week.

    According to Reuters, Brent contracts ended the session high 51 cents, 0.79 percent, to settle at $ 64.84 per barrel. It ended the global benchmark crude for the week on gains of more than 3 percent after falling more than 8 percent a week before the past. West Texas Intermediate rose 34 cents, 0.55 percent, to settle at $ 61.68 a barrel after touching $ 61.94, its highest level in eight days. The US benchmark crude ended the week up more than 4 percent after losing nearly 10 percent last week.

    US energy companies added oil refineries for the fourth week in a row, even though crude prices fell from a three-year high over the past two weeks as more oil drilling companies increased their spending plans for 2018.

    "The drilling companies added seven oil excavators in the week ending Feb. 16, bringing the total number of active excavators to 798, the highest level since April 2015," Baker Hughes Energy Services said in its closely monitored weekly report.

    This is the first time since June that the number of oil drilling rigs in the United States has increased for four consecutive weeks. The number of the US oil rigs (a preliminary indicator of future production) is much higher than a year ago when it hit 597 diggers, as energy companies continued to increase spending since mid-2016 when oil prices began to recover from a two-year collapse.

    According to the Baker Hughes report, the total number of oil and natural gas rigs operating in the United States was 975 on February 16, compared to 876 in 2017, 509 in 2016, and 978 in 2015, most of which are both for oil and gas.​

© All Rights Reserved for Asharqia Chamber