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Oil prices have been falling throughout 2014, nearly being halved since June as a result of disproportionally increased supplies. Last week, the price of Brent crude oil reached a five-year low after tumbling below USD 59 a barrel for the first time since May 2009. Oil prices have tumbled by half since June amid surging production and slower than expected demand growth. In recent months, oil prices have plunged on concerns about ample global supplies, as U.S. output continues to grow rapidly and members of the Organization of the Petroleum Exporting Countries have appeared reluctant to cut production to keep prices high.
Oil prices have nearly halved since their peak in June this year, their sharpest fall since the 2008 financial crisis. The slump has accelerated, falling almost 20%, since the Organization of the Petroleum Exporting Countries declined to cut output on Nov. 27 in response to a global supply glut. Oil futures rallied Friday, shaking off sharp losses earlier in the day and rebounding from their lowest settlement in more than five years. Oil fluctuated after the biggest increase in more than two years as Saudi Arabia said it was confident that prices would rebound as global economic growth boosts demand. West Texas Intermediate climbed as much as 5.2% in New York and Brent 4% in London. A measure of expected WTI futures movements and a gauge of options value was at the highest level since October 2011, data compiled by Bloombergshow.
While Ali Al-Naimi, Saudi Arabia's oil minister, said Friday that a slump in prices was temporary, he also said it would be “difficult, if not impossible” for Opec to curb its oil production amid a glut, the Saudi Press Agency reported. Prices rose immediately after his remarks, before ending the day at the lowest in five years. The nation accounted for about 13% of global oil output last year, BP Plc estimates.
“Oil continues to find value buyers when it falls to these levels,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “This is still a weak market. We’re looking at more supply, not less.”
Brent crude futures rose more than 2 percent toward $63 a barrel on Monday as Asian markets firmed into a holiday-shortened week and consensus spread that prices would likely remain above $60 for the rest of the year. MSCI`s broadest index of Asia-Pacific shares outside Japan extended gains and was up 1.4 percent. Japan`s Nikkei pared early gains but managed to eke out a 0.1 percent rise ahead of a Japanese public holiday on Tuesday, while Australian shares surged 1.9 percent.
Saudi Petroleum Minister Ali Naimi said Sunday that he was certain the oil market would recover with the improvement of the global economy. Oil peaked at $107 a barrel in June but has plunged since then due to weak demand, especially after Saudi Arabia and other members of the Organization of Petroleum Exporting Countries agreed to maintain production levels. Naimi, in a speech at an energy summit in Abu Dhabi, denied his government was trying to suppress oil prices. Asian markets were mostly higher Monday after the Fed's pledge not to rush to raise interest rates prompted investors to add risky assets ahead of the year-end holiday. A rise in the price of oil boosted energy stocks.
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