Volatility dominates in oil market
By Nigar Abbasova
Volatility is still high in the ‘black gold’ market due to controversial expectations on whether oil producers will reach production freeze agreement in the upcoming Algeria meeting scheduled for September 26-28.
Oil pieces in the world market restored a growth on September 2. Brent crude futures were 0.68 percent up from the previous close and stood at $45.76, while U.S. West Texas Intermediate (WTI) crude was 0.67 percent up at $43.45 per barrel, Interfax reported.
The price of a barrel of Azeri Light crude oil decreased by $1.41 to stand at $47.91 in the world markets.
The growth in the market followed a sharp slump observed in the previous close, which became the sharpest weekly loss since January as most of traders brushed aside talks on a possible output freeze and focused on a growing glut from U.S. crude stockpiles.
U.S. oil reserves increased by 2.3 million barrels, the U.S. Energy Department reported, while forecasted growth was at the level of 1.2 million barrels.
Saxo Bank's head of commodity strategy Ole Hansen told Trend that a potential for the further jump in oil prices is restricted.
“Growth of oil price up to $50 per barrel triggered the growth of hedging activity among oil producers,” he said.
Hansen believes that the tendency, growing number of oil platforms in the U.S., as well as supply glut is expected to restrict a potential for the increase in prices.
Attention of traders is also focused on the U.S. employment statistics, which is to come in the short run. The data is also believed to have an influence on the FRS decision on interest rate.
An increase in U.S. interest rates is expected to lift the dollar and influence oil prices as strong greenback makes fuel purchases more expensive for traders, who conduct business in other currencies.
Moreover, summer driving season is drawing to an end, while perspective of the growth in oil reserves triggers decrease in oil prices.
Hansen also mentioned that the market stabilized due to speculation over the possible production freeze, mentioning that the main question now is whether closure of the deal will be possible, taking into account the fact that some players of the market seek to reserve a right of production growth.
BP Chief Executive Robert Dudley, meanwhile, voiced that he expects global oil prices to remain at around $50 per barrel till the end of this year and at the same level or even "little above" in 2017, Reuters reported.
"I think for now, since 2014, we are back into the balance with oil and gas. Supply and demand balance is just about being reached right now. But this will take quite some time to work off the stock levels of oil," he said.
The issue of putting ceilings on production was also tossed around before the Doha meeting, participants, however, failed to reach any agreement.
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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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