Oil price faces fresh downturn as Russian Federation, Saudi tussle in Europe

Saudi oil minister Ali al-Naimi on Sunday said demand for oil worldwide would soon reflect the attractiveness of current prices, noting Asia as key to the growth.

The Stoxx 600 has recouped about two-thirds of the decline from a summer rout and is heading for an annual gain of 11 percent, the most since 2013. We see less non-OPEC supply.

Forties price differentials are close to their lowest in five months, having traded at a discount to the dated Brent benchmark more often in 2015 than at any time in the last 20 years, and differentials for a string of crude oil grades now stand at multi-month lows. We want to tell the world that high efficiency producing countries are the ones that deserve market share.

The greenback has gained nearly 5% against a basket of other leading currencies since early October as markets expect the US Federal Reserve to be the first major central bank to raise interest rates since the global financial crisis of 2008/2009.

While the Saudis had limited supplies in years past to help stabilize oil prices, the new policy has helped Saudi oil claw back market share it lost as us production boomed in 2014.

Venezuela, which has been advocating coordinated action on oil production to support prices, advanced the idea of agreeing an "equilibrium" global oil price target of $88/barrel at a closely watched technical meeting between a number of OPEC and non-OPEC producers in Vienna October 21.

Amin Nasser, the CEO of Saudi Aramco, which is one of the parties to the OGCI, said the company planned to invest $100 billion in gas over the next 10 years, with a view to phasing out direct burning of oil for power generation, which can at times reach 900,000 b/d. Other experts said Opec's share in the world oil market had shrunk to 30 percent. Beyond 2016, the fall in non-OPEC supply is likely to accelerate, as the cancellation and postponement of projects will start feeding into future supplies, and the impact of previous record investments on oil output starts to fade away.

"Rather than being a commodity in decline, as a few would like to portray, supply and demand patterns indicate that the long-term fundamentals of the oil complex remain robust". Russia, the world's largest oil producer, has stated desire to discuss the oil prices with OPEC, which could contribute to the upward slant of the prices in the short run. Could such a tectonic shift mean oil prices not just lower for longer but lower forever?

Crude oil rose 0.99 per cent to Rs 3,073 per barrel in futures market today as speculators created fresh bets, taking positive cues from Asian markets.

The writer is Asia Editorial director.