Saudi call for stability calms oil futures market

At the time of writing, West Texas Intermediate (WTI) Crude traded at US$42.03, down 1.73 percent, and Brent Crude was down 1.47 percent to US$44.32. Oil traders seem to be ignoring that experience.

Last week, the U.S. Commodity Futures Trading Commission (CFTC) said short positions in WTI rose to 218, 623 for the week ending on August 2, the highest amount since 2006.

Cambridge Energy Research Associates Chairman Dan Yergin told CNBC’s “Squawk Box” on Friday that he thinks oil prices are entering a recovery phase, after suffering from glut concerns.

On London’s ICE Futures exchange, Brent crude-which is the global oil benchmark-fell 1.2 percent to reach $43.55 a barrel.

Global production of crude oil will fall behind demand in the third quarter of this year as the current oversupply that has fueled the oil price slump clears out, according to the International Energy Agency.

A weak USA dollar also underpinned the energy markets on Friday, as traders reacted to disappointing economic data.

Believe it or not but Saudi Arabia, which flooded the world oil market in July with a record 10.87 million barrels a day, now claims that major producers will need to move to steady the market at a meeting next month.

The Dow Jones industrial average climbed 0.64 percent, closing at 18,613.52, and the Standard & Poor’s 500 index gained 0.47 percent, to 2,185.79.

The Saudi minister’s comments reversed a gathering sell-off on the back of the IEA report.

US crude rose 96 cents to $44.45 after touching its highest level since July 22 at $44.57 per barrel. They added 17 rigs, the biggest increase since December. The settlement was the highest since July 22, according to FactSet data. To this extent, European and United States oil refineries may have no alternative but to cut down on their output as a way of dealing with the problem.

Oil prices are still some 12.5 percent below their last peak in June as brimming storage tanks and production that exceeds consumption weighs on markets.

That mistake has so far turned out to be special for the crude oil prices.

OPEC meetings earlier this year failed to agree on any production ceiling, as key producers preferred instead to fight for market share in a Saudi-led strategy.

And a report from the Organization of Petroleum Exporting Countries (OPEC) this week showed Saudi Arabia’s July oil production at a record high of almost 10.5 million barrels per day.