Saudi Arabia won’t limit production and will seek to supply any demand from the market, Ali Al-Naimi, the country’s oil minister, said December 30 on state television.
Phillip Futures investment analyst Daniel Ang said the timing of a price rebound would depend on when the oversupply subsides.
Brent, the worldwide oil benchmark, dropped to as low as $US33.54 a barrel, the lowest level since June 2004.
USA crude for February delivery was 19 cents higher at $36.16 a barrel at 0124 GMT (2024 ET), after slipping 79 cents in the previous session.
“This is likely a spillover effect from the sharp declines in the Chinese stock market”.
Traders said market intelligence firm Genscape reported a build of more than 480,000 barrels in Cushing crude supplies for the week to January 1, after flooding in the U.S. Midwest caused temporary closure of a couple of pipelines.
The clash between the two Middle Eastern rivals also comes as Iran hopes to ramp up oil exports following the expected removal of sanctions against it after reaching a deal over its alleged nuclear weapons development program. Danske Bank estimates that crude oil prices could test the $25 per barrel mark before crude oil producers get serious about curbing oil production.
The production of OPEC countries is now around 32 million barrels per day (bpd).
U.S. oil prices dived on Thursday (Jan 7) to the lowest point in 12 years, pummelled by fresh market turmoil centered on China, and a chronic global supply glut.
The furor over Saudi Arabia’s execution of a Shi’ite cleric has stripped almost 8 percent off the price of oil in the last three trading days, killing speculation that OPEC members might agree to production cuts to lift prices.
US Secretary of State John Kerry called his counterparts in each country in a bid to ease the tensions and the United Nations moved to shelter peace efforts in Syria and Yemen from the diplomatic storm. US crude’s West Texas Intermediate (WTI) futures were up 77 cents, or 2.08 percent, at $37.81 a barrel.
The market had already fallen heavily on Wednesday, with Brent breaching US$35 on fears that the ongoing row between key producers Iran and Saudi Arabia would dim prospects for output cuts.
To start off, all we can say is that there is more or less no reason to keep expectations high for a miraculous oil price recovery.