Saudi to launch $50bn renewable energy programme

"If we continue to use fossil fuels to reach this demand, our export of oil will be at risk since the rate of consumption of oil in Saudi Arabia is 4 per cent greater than our rate of [oil] production increase", he said on Tuesday on the sidelines of this week's World Future Energy Summit in Abu Dhabi.

The fall in USA dollar has also facilitated oil price growth.

Brent oil rose above $56 a barrel after OPEC members including Saudi Arabia said output cuts are bringing the market into balance, while the dollar weakened.

Traders said oil drew some support from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between OPEC and other producers like Russian Federation. "My expectations (are) ... that the rebalancing that started slowly in 2016 will have its full impact by the first half".

Oil producing countries are hoping that reducing their daily output will help to increase prices.On Dec. 1, OPEC members signed an agreement, in which they committed to reduce oil production to 1.2 million barrels per day. While committing to the cuts, he had also said producers are unlikely to extend their agreement to cut oil output beyond six months, especially if global inventories fall to the five-year average.

Market direction this week will be fluid, with a monthly report from OPEC this week expected to offer a hint on compliance and supply and demand factors for 2017.

"Many of the folks at Davos think shale will kill the rally, but that really can not replace all of the oil production that was wiped out" by cuts in capital expenditures in the oil market, said Phil Flynn, senior market analyst at Price Futures Group.

"I am sure that OPEC and non-OPEC states would commit to oil cut".

He added that a recent trend of declining Chinese oil production due to low prices could be reversed if the market strengthened. "Prices will go up, US and other production will go up and put downward pressure on prices again". Oil prices have slumped 5 percent in the first few weeks of the year.

The EIA said earlier this month that it expects US crude production to average 9 million bpd in 2017, up from its previous estimate of 8.7 million bpd.

The organization expects the Saudi economy to grow 0.4% this year, down from a forecast of 2% just three months ago, because of OPEC oil production cuts.

Over the next fortnight, we expect oil (CMP; $53/bbl) to trade higher towards the $57 mark, while on the MCX (CMPRs 3,614 a barrel), prices may move higher towards Rs 3,750 a barrel level.

  • Anthony Vega