Tepid economic data from Japan and indications that Saudi Arabia’s 2016 budget is based on prices staying low affected oil
Business Standard- December 29, 2015 – Oil prices remained weak in Asia today on tepid economic data from Japan and indications that major crude exporter Saudi Arabia’s 2016 budget is based on prices staying low.
Prices tanked more than 3% yesterday, effectively dousing a rally that followed after Brent crude tumbled to 11-year lows last week. Volumes were thin as investors were in a holiday mood.
At around 0330 GMT, US benchmark West Texas Intermediate for delivery in February was up one cent at $36.82 and Brent crude for February was trading two cents higher at $36.64. Both contracts were down earlier Tuesday.
Daniel Ang, an investment analyst with Phillip Futures in Singapore, said the price weakness could have been sparked by data showing Japanese industrial production fell 1.0% in November from a month earlier.
Reports that key petroleum exporter Saudi Arabia will cut fuel and utility subsidies in response to a record budget deficit to cope with plunging oil prices also spooked the market.
Bloomberg News said Saudi’s 2016 budget is probably based on crude prices of about $29 a barrel.
The kingdom and its Gulf partners had opposed calls by poorer OPEC members to slash the group’s high production levels in order to ease a supply glut and reduce prices.
The crude oversupply is expected to last into 2016, with no production cuts in sight and Iran poised to ramp up its exports within months once western economic sanctions are lifted as part of a deal to curb Tehran’s nuclear ambitions, analysts said.
