Petroleum rebounds some, but slips for 4th week

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Petroleum rebounds some, but slips for 4th week

Oil recovered from the lowest closing price since May 2009 amid the highest trading volatility in more than three years as Saudi Arabia’s oil minister said he’s optimistic about global demand in the future.

West Texas Intermediate climbed as much as 2.6 percent in New York, trimming a fourth weekly drop. A measure of expected futures movements and a gauge of options value was at the highest level since October 2011, data show.

Saudi Arabia and OPEC would find it “difficult, if not impossible” to give up market share by cutting supply, according to Oil Minister Ali Al-Naimi.

Crude has slumped more than 25 percent 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 boosting speculation that they’ll compete with the 12-member group for market share.

“Oversupply is the name of the game,” Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney, said Friday. “The price action that we’ve seen has been really negative and there’s a lot of volatility.”

West Texas Intermediate for January delivery rose as much as $1.39 to $55.50 a barrel in electronic trading on the New York Mercantile Exchange and was at $54.84 at 1:56 p.m., Singapore time. The contract, which expired Friday, fell $2.36 to $54.11 on Thursday. The more-active February future gained 74 cents to $55.10. Total volume was about 26 percent above the 100-day average. Prices have decreased 44 percent this year.

Brent for February settlement was 36 cents higher at $59.63 a barrel on the London-based ICE Futures Europe exchange. It slid $1.91 to $59.27 also the lowest close since May 2009. The European benchmark crude traded at a premium of $4.51 to West Texas Intermediate for February.

Implied volatility for at-the-money options in the front-month West Texas Intermediate contract increased to about 50 percent, data show. Brent volatility also is its 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, which supplies about 40 percent of the world’s oil, pumped 30.56 million barrels a day in November, a survey of companies, producers and analysts shows. That exceeded its collective target of 30 million for a sixth straight month. Saudi Arabia is the biggest member.

In Russia, the world’s largest crude producer, the economy must adapt to the reality of prices that could decline to as low as $40 a barrel, according to President Vladimir Putin. Oil’s collapse may be due to a battle for market share between traditional producers and shale companies, he said at his annual press conference in Moscow Thursday.

The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.

Production from the nation, the world’s biggest oil consumer, expanded to 9.14 million barrels a day through Dec. 12, the Energy Information Administration said. That’s the highest level in weekly data that started in January 1983.

WTI will drop next week, a separate survey shows.

Bloomberg


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