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Oil steadies around $86 on Saudi–Kuwait oilfield news - ASHARQ AL-AWSAT English Archive
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A gas flame is seen in the desert near the Khurais oilfield, about 99 miles (160 kilometers) from Riyadh, in Saudi Arabia, on June 23, 2008. (Reuters/Ali Jarekji)

A gas flame is seen in the desert near the Khurais oilfield, about 99 miles (160 kilometers) from Riyadh, in Saudi Arabia, on June 23, 2008. (Reuters/Ali Jarekji)

London, Reuters—Brent crude steadied around 86 US dollars a barrel on Monday, holding on to a rally from near four-year lows last week on news of a cut in Saudi–Kuwait oil output.

Production has been halted temporarily for environmental reasons at the Saudi–Kuwait Khafji oilfield, which has output of 280,000 to 300,000 barrels per day (bpd), a little more than 2 percent of Saudi Arabia’s total production capacity.

The move is unlikely to affect oil supplies from Saudi Arabia, the world’s top exporter, because the kingdom has significant surplus capacity.

But the news was cited as a positive factor by some traders at a time when crude oil production exceeds demand and ahead of an Organization of Petroleum Exporting Countries (OPEC) meeting on November 27 to discuss oil production.

“Some market participants seem to ‘buy’ the Saudi story,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. “But this price recovery is unlikely to last unless we get clear messages from OPEC that they will curtail production.”

Brent was down 10 cents at 86.06 dollars by 0820 GMT after rising 2 percent, on Friday, its biggest gain in over a month.

US crude gained 20 cents to 82.95 dollars a barrel.

Abundant global oil supplies coupled with a gloomy economic outlook from Europe to China pushed Brent to its lowest since 2010 last week, a loss of more than 25 percent since June.

Energy economists have slashed their forecasts of world oil demand growth for next year as the global economic outlook weakens.

And it is not clear if OPEC members will cut output to support prices as new supplies from North American shale oil overwhelm the market.

Saudi Arabia, Kuwait and Iran have all indicated reluctance to change supply policy.

Morgan Stanley oil analyst Adam Longson said the closure of the Khafji oilfield was a temporary factor for the market.

“The shutdown was not aimed at OPEC policy and ultimately may not affect production, given spare capacity,” Longson said.

Saudi Arabia pumped around 9.7 million bpd in September but says it has the ability to produce as much as 12.5 million bpd.

Strong US consumer sentiment data released on Friday offered some support for oil.

Investors kept an eye on any disruption to oil supply from geopolitical developments.

Tension mounted as the Islamic State of Iraq and Syria’s fight against Kurdish defenders further destabilized the Syrian border town of Kobani.

Traders are also concerned about uncertainty over who is in charge of Libya’s vast oil reserves, after a self-styled government controlling Tripoli announced its oil policies.

Libya is currently producing 800,000 bpd of oil, down more than 40 percent from its peak of 1.4 million bpd in mid-2013.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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