Oil rises despite Saudi comments

23rd December 2014, Comments 0 comments

Oil rose Tuesday on optimism over upcoming US data and lower Libyan output, but gains were capped after Saudi Arabia declared OPEC will not cut output even at $20 per barrel.

Brent North Sea crude for delivery in February gained 75 cents to stand at $60.86 a barrel nearing midday in London.

US benchmark West Texas Intermediate for February won 83 cents to $56.09 per barrel compared with Monday's closing value.

"We could see oil move slightly up today as investors expect the US third-quarter GDP figures to be revised upwards," Daniel Ang, investment analyst at Phillip Futures in Singapore, told AFP.

The US Commerce Department will release the latest gross domestic product estimates later Tuesday.

Economists surveyed by the Wall Street Journal expect the agency to say the US economy grew at a seasonally adjusted rate of 4.3 percent in the July-September quarter, up from its previous estimate of 3.9 percent.

US economic data is closely watched by crude investors as the country is the world's biggest oil consuming nation.

Tuesday's oil gains were however capped by comments from Saudi Arabia, which is the biggest producer in the 12-nation Organization of Petroleum Exporting Countries (OPEC) cartel.

OPEC will not cut oil production even if the price drops to $20 a barrel -- and it is unfair to expect the cartel to reduce output if non-members do not, Saudi Arabia said.

"Whether it goes down to $20 a barrel, $40, $50, $60, it is irrelevant," the kingdom's Oil Minister Ali al-Naimi said in an interview with the Middle East Economic Survey (MEES), an industry weekly.

- 'Crooked logic' -

In unusually detailed comments, Naimi defended a decision by OPEC last month to maintain a production ceiling of 30 million barrels per day.

The decision sent global crude prices tumbling, worsening a price drop that has seen them fall by around 50 percent since June.

Slower demand growth and a stronger dollar have also contributed to the slump, pushing oil prices to five-year lows last week.

Saudi Arabia has traditionally acted to balance demand and supply in the global oil market because it is the only country with substantial spare production capacity, according to the International Monetary Fund.

The kingdom pumps about 9.6 million barrels per day but Naimi said it is "crooked logic" to expect his country to cut and then lose business to other major producers outside OPEC.

The increasingly competitive global oil market has seen daily United States output rise by more than 40 percent since 2006, boosted by booming shale energy output, but at a production cost which can be three or four times that of extracting Middle Eastern oil.

"Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce?" Naimi asked during the interview conducted with MEES on Sunday.

"If I reduce, what happens to my market share? The price will go up and the Russians, the Brazilians, US shale oil producers will take my share."

Naimi added it is "unfair" for the cartel to reduce output because it is not pumping most of the world's oil.

"We produce less than 40 percent of global output. We are the most efficient producer. It is unbelievable after the analysis we carried out for us to cut," he said.

Oil prices spiralled last week to their lowest points for more than five years.

Brent tumbled to $58.50 per barrel on December 16, touching a trough last seen in May 2009. WTI hit a similar low of $53.60 the same day.

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© 2014 AFP

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