Saudi Arabia predicts increase in oil price

<p>Saudi Arabia’s oil minister has claimed the recent drop in prices is temporary.</p>

Saudi Arabia's oil minister has claimed the recent drop in oil prices is temporary and predicted an increase in the future.

Ali al-Naimi explained that commodity price fluctuations were set to continue but he was hopeful that there would be a stabilisation in the future. Saudi Arabia is the biggest production nation in the Organization of Petroleum Exporting Countries (Opec) and was one of the members opposed to a potential reduction in output.

The oil producing cartel met in November to discuss methods to halt the decline of oil prices, which have halved since the turn of the year. A reduction in output had been highlighted as a potential method to tackle the slide but faced opposition from a number of members, including non-Opec member Russia.

A decision was made to maintain the current output levels and Mr al-Naimi is now hopeful prices will improve in the coming months. On Thursday (December 18th), the price of Brent crude had fallen below $63 (£40) a barrel while US crude had edged down to $58 a barrel. It is a stark contrast from the summer months when prices were well above $100 a barrel.

Mr al-Naimi explained that it was "difficult, or even impossible, for Saudi Arabia or Opec to undertake any measure that would lead to a reduction in [their] share of the market and an increase in of others".

Russia has been hit hard by the falling oil prices. The country relies heavily on revenues from oil exports and suffered from the drop in Brent and US crude. Russia's central bank recently took the decision to increase interest rates from 10.5 per cent to 17 per cent to help combat the sliding rouble which has lost considerable value against the US dollar.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.