Prices rally after recent lower run

09 September 1994

Oil prices have rallied after slipping by up to $3 a barrel during August. The rebound began in the last week of the month but prices for the benchmark Brent crude have still not climbed back over $16 a barrel. The rally appeared to be spurred by indications that gasoline may be in temporary short supply in the US as a result of refinery shutdowns.

Nigerian government moves against officials in the state run oil companies have not affected market sentiment. The strike in the Nigerian industry, now entering its tenth week, has had no new effect on export volumes which continue to run at around 1.5 million barrels a day (b/d).

Despite the price slide in August oil is still higher than it was at this time last year. The OPEC basket of crude oils, having fallen by $1.30 a barrel since mid-July, averaged $16.70 a barrel in the third week of August which was $0.40 a barrel higher than a year ago. Unless there is further disruption from Nigeria or other unexpected negative news, analysts expect oil prices to continue in a lower, less volatile range during September.

Figures for US oil imports during the first half of 1994 show a general decline in imports from OPEC countries and from Saudi Arabia in particular. Total US petroleum imports were 3 per cent up on last year at 8.709 million b/d during the first six months but imports from Saudi Arabia were down by 16.7 per cent at 1.325 million b/d. Total OPEC supplies declined by 7 per cent to 4.153 million b/d. The kingdom is still the largest US supplier, followed by Venezuela and Canada. In contrast, Kuwait has rebuilt its US market and supplied an average of 324,000 million b/d during the period, an increase of 43.6 per cent from a year ago. Analysts say the changing pattern of US imports reflects strategic shifts by both buyers and sellers. The US is expected to continue to buy more oil from the Americas while Gulf producers will be pushing more volume to Japan and China where margins are higher than in the US trade.

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