U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Friday, picking up where they left off the previous session. On Thursday, oil prices rose 1% after top oil producer Saudi Arabia rejected calls for additional OPEC+ supply and the International Energy Agency said surging natural gas prices could boost demand for oil among power generators.
The price action suggests traders are downplaying an unexpectedly large increase in U.S. crude inventories as refiners cut production in a generally slower period for those facilities, according to a weekly government inventories report.
Saudi Energy Minister Dismisses Calls for Extra OPEC+ Barrels
OPEC leader Saudi Arabia dismissed calls for speedier oil output increases on Thursday, saying its efforts with allies were enough and protecting the oil market from the wild price swings seen in natural gas and coal markets.
“What we see in the oil market today is an incremental (price) increase of 29%, vis-à-vis 500% increases in (natural) gas prices, 300% increases in coal prices, 200% increases in NGLs (natural gas liquids) …,” Saudi energy minister Prince Abdulaziz bin Salman told a forum in Moscow on Thursday.
Asked about calls by major consumers like the United States for OPEC+ to increase production further to cool off rising oil prices, Prince Abdulaziz said: “I keep telling people we are increasing production.”
He said OPEC+ would be adding 400,000 barrels per day (bpd) in November, and then again in the following months.
“We want to make sure that we reduce those excess capacities that we have developed as a result of COVID,” he said, adding that OPEC+ wanted to do it “in a gradual, phased-in approach.
Like I wrote on Thursday, U.S. producers and OPEC+ producers are not likely to give in to any pressure from the Biden administration to raise production. The energy crunch is a global issue. It’s going to take more than pressure from Biden to get the U.S. producers to budge.
You read the Saudi response. They don’t feel it’s their fault that coal and natural gas prices are soaring. And OPEC+ is raising monthly output gradually. It’s not like they are holding production steady or proposing output cuts. The prices are being set by supply and demand. Crude oil is a volatile commodity and this time, the volatility is moving prices higher. Eighteen months ago volatility was driving prices lower.
Continue to monitor the shifting to crude oil from natural gas by power generators. Once it turns cold in Europe, prices could spike higher with $100 crude oil a very strong possibility.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire