Saudi Arabia raised oil prices to Asia over the weekend, after the kingdom’s oil minister said global demand was gradually improving amid a record buildup in supply.
Beginning in May, state-owned Saudi Arabian Oil Co., also known as Saudi Aramco, will raise oil prices to Asian economies by 30 cents, setting the discount to 60 cents a barrel to the regional benchmark. That was the lowest discount since December.
The company cut pricing to the United States by 10 cents and to Northwest Europe by 20 cents.
Saudi Arabia’s oil minister Ali al-Naimi has expressed confidence that the global market for the Arab Light grade crude was improving. Speaking at a conference in Riyadh last month, al-Naimi said his country was prepared to ride out the market slump in a sign of confidence prices would eventually recover. Al-Naimi also stated that Saudi Arabia would not take sole responsibility for boosting prices, signaling that western producers must also participate to better align the global supply-demand imbalance.
Brent crude, the global benchmark, closed at $54.95 a barrel on Friday, down 3.8 percent. US benchmark West Texas Intermediate (WTI) fell 1.9 percent to $49.14 a barrel.
Oil to fall to $15 a barrel?
The most pessimistic forecast suggests global crude prices will fall to $15 a barrel by the end of 2015. Dennis Gartman, a financial expert and CNBC panelist, suggests crude prices will fall “stunningly” lower. According to Gartman, future crude rallies are likely to meet the same fate as the January-February rally, where prices rebounded by around a third only to fall back down. In Gartman’s view, the abundance of crude that has flooded the market will continue to weigh on prices. As inventories continue to build, storage may soon become a serious problem.
The consensus view among experts is that oil prices will remain on the lower end of the spectrum, but probably won’t fall too far below $40 a barrel. The reason is that global demand for oil is still increasing, albeit in the developing world. Oil consumption increased by around 5 million barrels per day between 2008 and 2014, according to The Wall Street Journal. Demand increased in the Asia Pacific region, Middle East, South America and Africa, but declined in the United States and European Union.