EMEA News
Crude Prices Escalate, But UAE Thinks They Need to be Higher
For all of crude's worrisome losses this week due to a strengthening U.S. dollar, it still managed to post a 3 percent weekly gain on Friday with West Texas Intermediate rising 78 cents to $63.55 per barrel; Brent climbed 56 cents to $66.95 per barrel, also achieving a 3 percent gain for the week.
This time, the gains were said to be inspired by a dip in Libyan production (due to the shutdown of that country's El Feel oilfield), and yet more rhetoric from the Organization of the Petroleum Exporting Countries (OPEC) that its production cutbacks are effectively eroding excess stockpiles.
However, it's becoming more apparent that in addition to no discernible logic or consistency dictating trading behaviour, whatever turns the crude market takes will be followed by concern from certain parties.
The current state of crude prices, which many fear is too high and merely encouraging U.S. shale producers to pump all out, displeases Suhail al-Mazrouei, energy minister for the United Arab Emirates: speaking at an energy conference in London, he noted that level is not encouraging the flow of investments that the oil industry needs.
When asked if he regards oil at $60-65 as a sweet spot, he replied, "Am I seeing the right investments coming to the market? Not yet"; but he added that OPEC, of which he is the new president, is seeking a balanced market rather than targeting a specific price.
But if the popular critical view is correct and higher prices continue to encourage more production not just from the U.S. but many countries around the world, the market will soon be swamped again with oil and prices will plummet.
They key factor that could prevent another glut from happening is of course demand, and on that count the Energy Information Administration, which on Thursday reported that stockpiles at Cushing shrank for a ninth straight week to 30 million barrels, also disclosed that U.S. crude exports surpassed 2 million barrels per day last week for only the second time on record.
John Kilduff, founding partner at Again Capital, said the EIA's findings were "very bullish for crude oil," and he added that the stockpile decline "is starting to turn into a potentially critical situation that could be very supportive" for WTI prices, plus "the trouble in Libya seems to be on the upswing."
Earlier this week, Fatih Birol, executive director of the International Energy Agency, attempted to make sense of all the mixed messages being voiced by analysts by forecasting that rising oil production from North America, Brazil, and Mexico will cover demand growth for the next two years - but after that the market may destabilize due to high demand and under-investment.
