Brent crude oil rose back above $60 a barrel on Wednesday, extending its recent rebound after Saudi Arabia’s powerful energy minister vowed to “stabilise” the market, though gains were capped by his disavowal of reports Riyadh was targeting higher prices. Khalid al Falih, speaking as the kingdom revealed a slight upward revision to its oil reserves following an audit, said while the near 40 percent drop in oil prices in final quarter of 2018 had been a “concern”, the actions taking by the so-called Opec+ alliance were already starting to show results.
Saudi Arabia and Russia led Opec+ in agreeing to a 1.2m barrel a day production cut in December as prices tumbled, with Riyadh taking the lead in removing the majority of the barrels from the market. “The kingdom takes the initiative to prove to our partners that we are serious about rebalancing the market,” Mr Falih said on Wednesday, adding the kingdom wanted to “stabilise” energy markets in a range that would both encourage new supplies while not harming the global economy.
The energy minister said the kingdom was pumping 10.2m barrels a day — a drop of approximately 800,000 barrels a day since output hit a record level in November — with Saudi Arabia also targeting lower exports. He said the amount shipped overseas in January would be approximately 7.2m b/d with that number expected to decline to 7.1m b/d by February. Mr Falih said the kingdom was not targeting a specific price, repeating a mantra Saudi Arabia has stuck to publicly for years.
A report in the Wall Street Journal this week said the kingdom may be looking to push prices back towards $80 a barrel due to its budget requirements. Brent crude oil, the international benchmark, hit a high of $60.52 a barrel shortly after Mr Falih’s comments on Wednesday, up 3 per cent on the day and at its highest level since December 17. West Texas Intermediate crude, the US benchmark, had posted similar gains to hit $51.48 a barrel. Both oil markers cut their gains abruptly, however, after the release of US energy department data on inventories. Crude stocks fell 1.7m barrels last week, a narrower draw than the 2.8m forecast in a Reuters poll of analysts.
Meanwhile, inventories of gasoline, which is refined from crude, jumped 8.1m barrels, much more than the estimate of 3.4m barrels. Brent and WTI were up 1.7 per cent and 1.9 per cent, respectively, following the release of the data. Many traders have been betting that the extent of the sell-off in the fourth quarter — when prices tumbled from above $86 a barrel to below $50 a barrel — were overdone.