Oil Market Update (November 27, 2012)

The price of oil fell slightly on Monday as a truce between Israel and militant group Hamas appeared to hold, preventing fighting in the Gaza Strip despite doubts late last week.

By late afternoon on Monday, benchmark oil for January delivery had dipped 75 cents, to $87.53 a barrel, in electronic trading on the New York Mercantile Exchange.

Crude traders were said to be keeping a close eye on developments in Egypt. On Sunday, the country’s president, Mohammed Morsi, granted himself near-absolute power, leading to clashes between his supporters and opponents.

Although the African nation is not a major oil producer, it is considered a vital transit region for oil trade.

In its annual World Energy Outlook, the International Energy Agency (IEA) predicts that by 2020 the US will be the world’s top oil producer. According to the report, an increased focus on lowering its dependence on foreign oil has seen production in the US soar to 15-year highs.

“By around 2020, the United States is projected to become the largest global oil producer” and will surpass Saudi Arabia for a period of time, the IEA stated. “The result is a continued fall in US oil imports [currently at 20 percent of its needs], to the extent that North America becomes a net oil exporter around 2030.”

The National Development Fund of Iran has allocated $1.5 billion for developing oil fields located in the Persian Gulf, IRNA quoted Mahmoud Zirakchianzadeh, the Iranian Offshore Oil Company’s managing director, as saying.

“As much as $20 billion worth of deals have been signed within the past two years,” he said. “Some $14 billion worth of new deals have been prepared and will be offered to contractors,” he added.

Iran is also reported to have attached priority to boosting gas production capacity at its joint oil fields with Qatar and Saudi Arabia.

There has been a rise in the US rig count, according to weekly counts published by Baker Hughes. This upside is said to be attributed to an increase in the tally of both oil- and gas-directed rigs.

Rigs engaged in exploration and production in the US totaled 1,809 for the week ended November 16, 2012. That is an increase of three from the previous week’s count and is the second rise in as many weeks.

The current nationwide rig count is more than double the six-year low of 876 that was hit in the week ended June 12, 2009, but is well below the previous-year level of 2,001.