Saudi Arabia: OPEC oil prices shoot up as major oil companies cut investment
February 4, 2015
On 3 February, the average price of the Organization of Petroleum Exporting Countries (OPEC) oil basket jumped to USD 51.8 per barrel, thereby reversing the losses suffered since the beginning of this year. The print represented a 24.8% increase over the USD 41.5 per barrel tallied on 12 January, when oil recorded the lowest price since 2009. That said, oil prices are still 53.1% below the level observed on the same day last year.
The recent surge in oil prices mainly reflected the announcement by some major crude producers of a reduction in capital expenditure on oil facilities as well as a significant drop in oil drilling in the United States. This situation built up expectations of a reduction in global crude supply. The strengthening of the U.S. dollar and a refinery strike in the United States have also played a role in the increase of crude prices. Analysts, however, warn that the global oil market is still oversupplied and that the recent jump in oil prices is likely to be short-lived.
According to the latest report from OPEC, Saudi Arabia’s oil production reached 9.60 million barrels per day (mbpd) in December, which was broadly unchanged from the 9.58 mbpd tallied in November.