Oil prices fall on latest rise in US drilling


Oil bounced up in early Tuesday trading given the support for the agreement expressed Tuesday in London.

Oil futures wavered Tuesday, with prices in NY struggling to reclaim the $50-a-barrel level after posting losses over the past two trading sessions.

Crude oil price for the Indian energy basket fell from $132.47 per barrel in July to $28.02 in January 2016. At the same time, however, they could also spur a much-needed inflow of oil money back into the region. It cut the pricing for its Arab light crude grade to an eight-month low for September sales, while the Arab medium variety was offered at the lowest level in four months.

The United States has taken the biggest hit to production in the past year or so.

Donald Morton, who runs an energy-trading desk at Herbert J. Sims & Co in Fairfield, Connecticut, said the projected decline in US shale production bumped the market only slightly. OPEC grouping which comprises of 13 oil producing countries is of strategic importance to India as they account for 85% and 94% of India’s crude oil and gas imports, respectively.

Decades later, he still believes that Saudi Arabia should not play the role of swing producer, despite the financial pain of lower prices today.

“If we, Saudi Arabia, or Opec as a whole, cut production without the participation of major non-Opec members, we would be sacrificing revenues as well as market share”, he writes. Brent crude oil prices were up $0.17, or 0.33%, at $52.12 a barrel. The global benchmark added 0.6 per cent to $51.85 in Singapore.

Oil prices settled down on Monday, weighed by oversupply concerns, with a spike in trade volume driving U.S prices below $50, but losses were limited amid a projected drop in American shale output. It needs oil to be well above $60 a barrel to balance the budget.

For these countries, the uptick in crude prices could hardly come at a worse time.

From a more macro perspective, simply examining the outright price history of oil and copper appears to reveal a decent correlation between the two.

Prices are likely to get a further boost if the Saudi Arabia-led OPEC formalizes the output-reduction framework at a general meeting on November 30. Many watchers say the news has been largely priced in and the market now has little fuel to sustain momentum.

For companies to start spending, the recent oil rally must be sustained. The group gathers on November 30 for its policy meeting.Doubts on whether OPEC will reach a deal that satisfies all 14 members has stalled the rally at around $50 a barrel.

Opec’s apparent change in heart is a big surprise, and the market is naturally skeptical as Opec is notoriously non-compliant with its own targets”, Blein said. Iran repeated plans to boost output to 4 million barrels a day. It is being driven by ideas that OPEC (and Russia) may implement a freeze or an output cut at the end of next month.

The main oil output in Azerbaijan now comes from the Azeri-Chirag-Guneshli field. High demand for oil since 2000 gave OPEC, and Saudi Arabia in particular, significant influence over prices, but it also spurred investments in higher-cost production methods in other locales, such as oil sands mining in Canada and ultra-deepwater oil extraction in Brazil. “From now on, the challenge is to build – and sustain – businesses that are good through all cycles”.

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