Current Oil Prices Steady with Completion of Pipeline Project
The current oil prices stay steady after a major pipeline expansion project of the U.S. was completed. The project will reduce oversupplied inventories of the largest crude consuming country worldwide.
In late afternoon deals on the ICE Futures Exchange, Brent for February delivery gained 22 cents to a crude price per barrel of $110.86.
On the NYMEX, the U.S. benchmark shed 23 cents to $93.33 per barrel.
The recently completed expansion of the Seaway Pipeline means that 400,000 oil barrels can now be brought daily from the oversupplied market of the midcontinent to the Gulf Coast refining hub.
Only 150,000 crude barrels could be previously moved to refiners, causing an inventory build-up of the WTI blend in Cushing.
The prices of crude have been increasing since the pipeline began with increased capacity, lowering Cushing’s supplies, according to Victor Shum, Managing Director of Singapore’s Purvin and Gertz.
A drop in inventory supplies typically implies a higher oil demand that boosts prices.
Moreover, the crude market currently obtained support from persistent supply concerns in the oil-rich region of the Middle East.
Saudi Arabia, the biggest exporter of oil, denied that the purpose of its 5 percent reduction in oil output is to increase the prices.
Ibrahim Mehanna, the country’s oil minister, reported that up and down movements in production are dependent on domestic demand which is seasonal by nature as it surged in the summer prior to dropping in the final quarter of the year.
Mehanna said that is completely wrong to associate the drop in Saudi oil production with an effort to increase prices.
Some problems to the eurozone’s growth and worries regarding the financial crisis of the U.S. have impacted oil demand, according to the minister.
He added that Riyadh was ready to respond to the current changes and reassures its commitment to meet its customers’ demands.
The minister said that Saudi Arabia is still fully committed to ensuring the oil market’s stability.
Matt Smith, analyst at Schneider Electric, recently said that a reported drop of five percent – or around nine million barrels daily – in the oil production of Saudi last December was to aid in prices by lowering supply.