Americas News
U.S. Crude Incurs 3.5 Percent Weekly Loss As Emirates Says Prices Should Be At $52/bbl
Yet again, crude prices on Friday fell due to the far less than expected impact of Tropical Storm Gordon on U.S. Gulf Coast output, as well as equity market weakness; ironically, the losses came amid word from Emirates that oil is still "hugely overpriced" and should be at $52 per barrel.
West Texas Intermediate fell 49 cents to $67.28 per barrel, on track for a 3.5 percent loss for the week; Brent declined by 30 cents to $76.20 per barrel, heading towards a 1.6 percent fall for the week.
The only significant boost this week for crude was due to expectations that Tropical Storm Gordon would wreak havoc on Gulf of Mexico oil platforms and Gulf Coast refineries, which caused Phil Flynn, analyst at Price Futures Group, to observe, "The market got too juiced up before the tropical storm...a lot of the weakness in the week (since) has been unwinding from that."
And while the U.S. dollar rose against a basket of other currencies due to strong job growth in August - something that would have normally caused a price surge - crude remained flat on reports of a rise in refined product stocks coupled with relatively weak demand for fuel during this summer's U.S. driving season: "As a result, the alarm bells are now ringing that a gasoline glut will persist for the foreseeable future," said Stephen Brennock, oil analyst at PVM.
Still, oil prices have risen about 20 percent this year, and this irritates Tim Clark, president of Emirates; on Friday, he told CNBC that "I am one of these people that says it is hugely overpriced: if you are at $77 or $83 dollars [per barrel] it should be at $52, that's where it needs to be."
He added, "Those people, those countries, those entities that say they can't make money on $52, they need to be doing something else."
Of course, as the head of a company involved in aviation, Clark has a vested interest in seeing lower oil prices, and he suggested that at the very worst the current prices won't climb higher because spot prices are now matching the futures price: "I think fuel is now capped out; the forward curve is flat."
The wild card, however, remains the notion that radically lower exports from Iran and declining output from Venezuela could lead to a market tightening - and skyrocketing prices.
But the Organization of the Petroleum Exporting Countries (OPEC), is determined to avoid the scenario, and on that score sources familiar with the matter told Reuters a technical committee of OPEC and non-OPEC participants will later this month discuss proposals for sharing out an output increase.
Specifically, the Joint Technical Committee will on September 17 consider proposals from Iran, Algeria, Russia, and Venezuela on distributing an agreed output increase of 1 million barrels per day.
Unfortunately for Emirates' Clark, OPEC's ideas of an acceptable oil price range is precisely the range he thinks is too high: earlier this week it was reported that the cartel's de facto leader, Saudi Arabia, along with many other Middle Eastern countries, are aiming to keep prices between $70 and $80 per barrel, a range they believe will generate enough revenue to finance economic development programs.
