Oil Prices Seek Bottom Level as Canada, Saudi Oil Set to Flood Market-Ejiofor Alike

Mrs Diezani Alison-Madueke, OPEC president

Crude oil prices dropped further on Tuesday, seeking bottom level for four consecutive days, as a brewing battle between Canadian and Saudi Arabia heavy crudes for America’s Gulf Coast refinery market threatens to drive prices even lower.

The battle for the global market share between the members of the Organisation of Petroleum Exporting Countries (OPEC) and the United States shale drillers had fuelled oil market slump, with the prices at their lowest since spring 2009 on mounting worries about a global supply glut.

Brent crude was down $2 at $51.11 a barrel yesterday, after falling to $51.01, its lowest since May 2009.

United States benchmark West Texas Intermediate was down $2.20 at $47.84 after plumbing an April 2009 low at $47.74.

Oil prices have plunged more than 55 percent since June, when Brent traded above $115 a barrel and US crude above $107.

The sell-off, which began on concerns of over-supply in high quality US shale crude, worsened after the OPEC meeting in November 2014, when Saudi Arabia ruled out production cuts as a means of boosting prices.

Reuters quoted Saudi Arabia’s King Abdullah as saying in a speech read for him on Tuesday that Saudi would deal with the challenge posed by lower oil prices “with a firm will”, and gave no sign that his country’s which is the No. 1 crude exporter will considering cutting supplies.

The kingdom had on Monday announced deep oil price discounts for its European and US customers, thus adding to the bearish state of oil markets already staggering from Russian output at post-Soviet-era highs and Iraqi oil shipments near 35-year highs.

As the stand-off between OPEC and US producers of light persists, sweet shale oil has captured the limelight in recent months.

With the clash over heavier grades playing out in the shadowy, opaque physical market may put even more pressure on global prices that have halved since June 2014.

Reuters reported that two factors will come into play over the next few weeks.
The first is that Saudi Arabia is offering crude at discounted prices in an attempt to defend its remaining share of the important regional market, which has shrunk by more than half in recent months.

There are also strong indications that new oil pipelines will pump record volumes of Canadian crude to the southern refineries, many better equipped to process heavy crudes than lighter shale oil.

The US Gulf Coast is already facing over-supply and with Saudis also facing fierce competition for their light grades, it is feared that the arrival of Canadian crude would push the prices lower at a time when oil markets already face a global glut expected to last for a year or longer.

Culled from Thisday