Crude oil prices rebounded from the lowest closing levels since May 2009 as comments from Saudi Arabia’s oil minister yesterday added to the most volatile market in three years.
West Texas Intermediate climbed as much as 4 percent in New York and Brent 2.9 percent in London. A measure of expected WTI futures movements and a gauge of options value was at the highest level since October 2011, data compiled by Bloomberg show.
While Ali Al-Naimi, Saudi Arabia’s oil minister, said yesterday that a slump in prices was temporary, he also said it would be “difficult, if not impossible” for OPEC to curb its oil production amid a glut, the Saudi Press Agency reported. Prices rose immediately after his remarks, before ending the day at the lowest in five years. The nation accounted for about 13 percent of global oil output last year, BP Plc estimates.
“Oil continues to find value buyers when it falls to these levels,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “This is still a weak market. We’re looking at more supply, not less.”
WTI for January delivery rose $1.99, or 3.7 percent, to $56.10 a barrel at 10:57 a.m. on the New York Mercantile Exchange. The contract, which expires today, fell 4.2 percent to $54.11 yesterday. The more active February future gained $1.71 to $56.07. Prices have decreased 43 percent this year.
Brent for February settlement increased $1.46, or 2.5 percent, to $60.73 a barrel on the London-based ICE Futures Europe exchange. It slid $1.91 to $59.27 yesterday. The European benchmark crude traded at a $4.66 premium to WTI for February delivery.
Crude has slumped about a quarter since Saudi Arabia led a decision last month by the Organization of Petroleum Exporting Countries to maintain its collective output target. U.S. oil producers continue to pump at record levels, contributing to a global glut and competing with the 12-member group for market share.
Implied volatility for at-the-money options in the front- month WTI contract increased to more than 51 percent today, data compiled by Bloomberg show. Brent volatility is also at the highest since 2011.
Oil markets are experiencing “temporary” instability caused mainly by a slowdown in the world economy, Al-Naimi said, according to comments published yesterday by the Saudi Press Agency. Steady global economic expansion will resume, spurring demand, according to the minister, leading him to be “optimistic about the future.”
OPEC shouldn’t be expected to cut output while other producers continue to expand, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Dec. 14. The group will refrain from cutting output even if oil prices fall as low as $40 a barrel and will wait at least three months before considering an emergency meeting, al-Mazrouei.
“Naimi appeared to be relaxed in his comments,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “His colleague from the UAE was a lot more enlightening. He called out the U.S. shale producers.”
OPEC, which supplies about 40 percent of the world’s oil, pumped 30.56 million barrels a day of crudein November, a Bloomberg survey of companies, producers and analysts shows. That exceeded its collective target of 30 million for a sixth straight month.
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