OIL PRICES: Oil remains high as output questioned
Crude oil prices stayed just over the $67-a-barrel mark during the week as traders switched attention from the foiled attack on Saudi Arabia's oil facilities to a disagreement over oil output between Opec and the International Energy Agency (IEA).
Brent crude ended at $67.03 a barrel on 2 May, compared with $67.63 a week earlier, after hitting almost $70 a barrel in early April.
Prices jumped on 27 April following news that the Saudi Interior Ministry had detained more than 170 foreign and Saudi nationals suspected of planning terrorist attacks on oil installations and military bases.
Oil analysts at Barclays Capital say the events in Saudi Arabia, along with the persistent uncertainty over the Iranian situation, served to remind markets of the inherent risk of the turbulent geopolitical landscape in the Middle East. 'We think that broad geopolitical threats will continue to provide a constructive backdrop in the oil market,' Barclays Capital notes.
Market tensions were also heightened by an apparent difference of opinion over oil output between Opec and the IEA. Opec President Mohammed al-Hamli, in Riyadh for a meeting of Middle East and Asian energy ministers, said on 2 May that crude oil market fundamentals were in 'good shape', signalling that no output increase was imminent. But IEA chief Claude Mandil warns there was a supply shortage that required producers to hike output, adding that this is having an impact on the price.
'At present, there is a lack of crude because we see crude stocks not increasing, whereas they should increase at this time of the year,' Mandil says. 'We think part of the pressure on prices is the result of the lack of spare capacity.'
Mandil calls on oil producers to invest in the oil sector to increase spare production capacity, which will eventually ease pressure on prices. However, Opec secretary-general Abdullah el-Badri says oil projects will take longer to complete because of a hike in costs.
'We have not seen this kind of high cost in the past,' he adds. 'Now I think they will not be shelved, but they will be delayed. Instead of finishing them in three to four years, some of them will finish in six years, some in 10 years.'
Saudi Petroleum & Mineral Resources Minister Ali Al-Naimi, has also weighed in to the debate, stressing there is no 'shortage in the oil situation now'.
Prices have remained high because of 'so many other factors', Al-Hamli adds. 'There are problems with the downstream. Refining is not coming out of maintenance very quickly.'
Crude oil prices stayed just over the $67-a-barrel mark during the week as traders switched attention from the foiled attack on Saudi Arabia's oil facilities to a disagreement over oil output between Opec and the International Energy Agency (IEA).
Brent crude ended at $67.03 a barrel on 2 May, compared with $67.63 a week earlier, after hitting almost $70 a barrel in early April. Prices jumped on 27 April following news that the Saudi Interior Ministry had detained more than 170 foreign and Saudi nationals suspected of planning terrorist attacks on oil installations and military bases. Oil analysts at Barclays Capital say the events in Saudi Arabia, along with the persistent uncertainty over the Iranian situation, served to remind markets of the inherent risk of the turbulent geopolitical landscape in the Middle East. 'We think that broad geopolitical threats will continue to provide a constructive backdrop in the oil market,' Barclays Capital notes. Market tensions were also heightened by an apparent difference of opinion over oil output between Opec and the IEA. Opec President Mohammed al-Hamli, in Riyadh for a meeting of Middle East and Asian energy ministers, said on 2 May that crude oil market fundamentals were in 'good shape', signalling that no output increase was imminent. But IEA chief Claude Mandil warns there was a supply shortage that required producers to hike output, adding that this is having an impact on the price. 'At present, there is a lack of crude because we see crude stocks not increasing, whereas they should increase at this time of the year,' Mandil says. 'We think part of the pressure on prices is the result of the lack of spare capacity.' Mandil calls on oil producers to invest in the oil sector to increase spare production capacity, which will eventually ease pressure on prices. However, Opec secretary-general Abdullah el-Badri says oil projects will take longer to complete because of a hike in costs. 'We have not seen this kind of high cost in the past,' he adds. 'Now I think they will not be shelved, but they will be delayed. Instead of finishing them in three to four years, some of them will finish in six years, some in 10 years.' Saudi Petroleum & Mineral Resources Minister Ali Al-Naimi, has also weighed in to the debate, stressing there is no 'shortage in the oil situation now'. Prices have remained high because of 'so many other factors', Al-Hamli adds. 'There are problems with the downstream. Refining is not coming out of maintenance very quickly.'This content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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