Hong Kong/Singapore: Oil gave up its gains after the world’s biggest crude exporter said it’s keeping up investments in energy projects.
Futures dropped as much as 4.1% after earlier rising as much as 1.7% in New York. State-run Saudi Arabian Oil Co. hasn’t reduced its investment capacity amid lower crude prices and is building a marine cluster in the eastern part of the Middle East nation, chairman Khalid Al-Falih said.
“The Saudi news surely would give a little bit of a worry that production would remain strong," Daniel Ang, an investment analyst at Phillip Futures, said by phone from Singapore. “The main reason for oil losing steam still comes from the fact that oil markets are currently in oversupply."
Oil has fallen about 16% this year as volatility in global markets adds to concern over brimming US stockpiles and the prospect of additional Iranian exports. While front-month futures in New York jumped 21% over the previous two sessions, prices may take as long as three years to normalize and a speedy rebound is unlikely, Bank of Montreal chief executive officer William Downe said in an interview in Davos, Switzerland.
West Texas Intermediate for March delivery dropped as much as $1.31 to $30.88 a barrel on the New York Mercantile Exchange and was at $31.04 at 8:49 a.m. London time. Total volume traded was more than double the 100-day average. Front-month prices dropped on Wednesday last week to $26.55 a barrel, the lowest close since 2003.
Brent for March settlement lost as much as $1.46, or 4.5%, to $30.72 a barrel on the London-based ICE Futures Europe exchange. The contract gained $2.93, or 10%, to $32.18 on Friday. Prices advanced 11% last week. The European benchmark crude was at a discount of 7 cents to WTI.
Speculators’ short position in WTI, or wagers on falling prices, dropped by 16,782 contracts, or 8.4%, to 184,193 futures and options in the week ended 19 January, according to CFTC data. Longs fell by 4,580 to 266,150, bringing the net-long position up 12,202 to 81,957.
New York crude capped a second annual loss in 2015 as the Organization of Petroleum Exporting Countries effectively abandoned production limits to defend market share, exacerbating a global glut. Ecuador and Venezuela are proposing output quotas for Opec to increase prices, a statement published in Ecuador presidency’s official gazette shows.
Aramco has formulated a new strategy in response to cheaper oil, Al-Falih said at a conference in Riyadh on Monday.
“I’ve continued to encourage fiscal discipline in my role as chairman of Aramco," he said. “In our investments capacity, oil and gas has not slowed down." Bloomberg