Oil Trades Near $42 as Saudi Arabia Says It's Ready to Cooperate

  • Kingdom ready to work with OPEC, non-OPEC to stabilize market
  • Statement doesn't reflect shift in Saudi policy, Barclays says

How Shale Oil Is Disrupting OPEC

Oil traded near $42 a barrel in New York on Saudi Arabia’s repeated pledge to work with OPEC and other producers to stabilize global crude markets.

Futures rebounded from a 3.6 percent drop after the report by the Saudi Press Agency. Barclays Plc said this doesn’t reflect any policy shift by the kingdom, the biggest member of the Organization of Petroleum Exporting Countries, which will meet Dec. 4. Saudi oil minister Ali al-Naimi made similar comments last week. Speculator short positions ended Nov. 17 at the highest in almost three months, U.S. Commodity Futures Trading Commission data show.

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"The Saudi statement doesn’t signal a policy shift, but there are so many short positions out there, which is making the market very sensitive," Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital LLC in Miami, said by phone. "The market is on pins and needles."

Oil has slumped about 45 percent over the past year amid speculation a global glut will persist as OPEC continues to pump above its collective quota. The organization has signaled since last year that it would only reduce output to remove the surplus if producers outside the group shared the burden.

WTI, Brent

WTI for January delivery slipped 15 cents to settle at $41.75 a barrel on the New York Mercantile Exchange. It earlier dropped as much as $1.49 and climbed as much as 85 cents. The December contract expired Friday after falling to the lowest since Aug. 26. The volume of all futures traded was 22 percent above the 100-day average.

January Brent climbed 17 cents to end the session at $44.83 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at $3.08 premium to WTI.

The price jump following the Saudi statement probably reflects that traders have acquired substantial short positions and are inclined to close these on bullish news, according to UBS Group AG. Short positions in Brent crude taken by speculators are at the highest level since October 2014, at 141,387 contracts, according to data from ICE Futures Europe.

“It’s hard to see what else moved the price besides the Saudi statement, even though it’s exactly what Oil Minister al-Naimi said last week,” said Giovanni Staunovo, an analyst at UBS in Zurich. “For me there’s nothing new, but the OPEC meeting is approaching and participants might prefer to close their short positions.”

Venezuelan Appeal

Oil fell earlier amid a broader commodity rout while Venezuela predicted prices may tumble to the mid-$20s a barrel unless OPEC tackles the global surplus. Venezuela is urging the group to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Oil Minister Eulogio Del Pino said Sunday.

“I don’t believe that it’s a strong intention from some part of OPEC to stabilize the market,” Iranian Oil Minister Bijan Namdar Zanganeh said at press conference in Tehran.

An Energy Information Administration report on Wednesday is projected to show that U.S. crude and gasoline inventories climbed last week, according to a Bloomberg survey of analysts. Supplies of distillate fuel, a category that includes diesel and heating, will probably show a decline, the survey shows.

Gasoline futures for December delivery increased 2.31 cents, or 1.8 percent, to close at $1.3134 a gallon. Diesel for December delivery advanced 0.3 cent to settle at $1.3743.

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