Oil prices rise as U.S. drilling declines

Oil prices fell today after the US Federal Reserve kept its main interest rate on hold and following a volatile week for crude.

When the price of crude oil makes up almost half of the cost of gasoline, we are concerned that allowing USA oil to be sold overseas at higher prices could increase prices here.

Federal Reserve chair Janet Yellen said the centre bank requires more improvements in the labour market and need to see inflation increase to the 2% annual rate, voanews.com reported.

“Indeed, the Fed’s hesitancy only appears to have reinforced investors’ worries about the global economy, rather than reassure them”, Capital Economics said in a commentary. While a notable part of their profits is driven by the capacity discipline followed by these airlines, a significant portion of this is attributable to the depressed crude oil prices.

Brent crude was down 15 cents at $48.93 a barrel at 1100 GMT, after touching an intraday high of $49.75.

The oil price continues to add uncertainty for producers, but many companies in the private sector are reporting stronger business as a result. US light crude oil futures were up $1.15 a barrel at $45.83.

It’s unfathomable how Malaysia – a net exporter of oil and gas (O&G) – would be impacted should the price of crude drop to US$20 per barrel. In July, Oman’s oil production averaged a record 1mn bpd.

In its September monthly oil market report, OPEC was more optimistic on oil demand despite the stockpiles and slow growth.

“The implied year-on-year growth by (the fourth quarter of 2015) of 120,000 barrels a day is lower than the prior week’s estimate of 125,000 barrels a day”, it said.

The price of crude oil moved marginally lower over the course of the past week.

World oil prices have roughly halved in value since a year ago, plagued by a global supply glut caused largely by cheaper production of United States oil following extraction from shale rock. It expected Brent to average $46 a barrel in 2016.

A rise in the dollar, fears that oil production of the Organization of Petroleum Exporting Countries will not slow and reduced political tensions in the Middle East from US-Russia talks on Syria also weighed on oil. Production from nations outside the group will be 58.2 million barrels a day in 2017, 1 million lower than previously forecast, according to an internal report.

The Fed decision to leave interest rates unchanged surprised many analysts, but the general consensus remains that it’s only a matter of time. USA producers are on track to spend $120 billion this year, a 40 percent drop from 2013.

Meanwhile, the U.S. House Energy and Commerce Committee voted 31-19 on Thursday to approve legislation for lifting a four-decade ban on USA oil exports.