Oil Prices Down Again as Saudi Oil Minister Rules Out Production Cut
Saudi Arabia insisted on Monday it would not cut back production no matter the value of crude, comments that put new pressure on oil prices the morning after the biggest one-day gain in over two years, Reuters reported.
The Mideast giant's oil minister, Ali al-Naimi, told the Middle East Economic Survey it was "not in the interest of OPEC producers to cut their production, whatever the price is." Other policymakers of the 12-member Organization of the Petroleum Exporting Countries had also reiterated their reluctance to intervene in oil markets, even though oil prices have halved since June.
By 11:35 a.m. ET on Monday, U.S. crude's front-month contract was nearly 3 percent. It had closed up nearly 5 percent on Friday after some traders brought up short possessions given that prices had hit five-year lows.
"We are going down because you have some OPEC ministers who come every day making statements trying to drive the market down," Olivier Jakob, an oil analyst at Petromatrix Oil in Zug, Switzerland, told Reuters. "They come every day to convey the message that they are not doing anything to restrict supplies and that they basically want oil prices to move lower to reduce production in the (United States)."
The slide in prices may be far from over, MarketWatch reported. A commodity analyst at Barclays told the publication the cartel's members are "committed to lower crude oil prices" for the time being.
"It would take a close above $64.25 (a barrel) this month to suggest seller capitulation," the unnamed sources said. Shortly before noon Monday, the barrel was trading at $55.43.
In the International Monetary Fund's view, meanwhile, the dramatic drop in oil prices is good news for the global economy, Reuters said. The development could boost activity by up to 0.7 percentage points next year, two senior IMF economists wrote on Monday.
"Overall, we see this as a shot in the arm for the global economy," said Olivier Blanchard, the IMF's chief economist, and Rabah Arezki, the head of its commodities research team.
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