Oil Maintains Price Rally – BusinessDay

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Brent oil is trading up Friday morning at $45.03 per barrel, setting crude futures on course for solid weekly gains.

A Goldman Sachs Research note in their Commodity Watch published overnight said market sentiment is turning more upbeat. “However, we still have high oil inventories globally, and with a strong peg for Brent price to the USD any signal to increase US interest rates in the near future has the potential to have a direct negative impact on oil price,” the note said.

Prices have been helped by disruptions in Nigeria and a workers strike in Kuwait, which has now been called off.

Oil price also received a boost from the US where gasoline demand in March climbed to a record for the month as low pump prices encouraged motorists to hit the highways.

Gasoline consumption rose 2.2% from a year earlier to 9.25m bbl/day, the American Petroleum Institute said Thursday in a monthly report.

Total deliveries of all fuel categories, a measure of demand, and rose 0.4% to the highest March total since 2008.

While OPEC members like Nigeria struggles to mount a response to the collapse in oil price, Saudi Arabia continues to be bullish.

On April 25 Saudi Prince Mohammed is scheduled to unveil his “Vision for the Kingdom of Saudi Arabia,” an historic plan encompassing broad economic and social changes.

It includes the creation of the world’s largest sovereign wealth fund, which will eventually hold more than $2 trillion in assets—enough to buy all of Apple, Google, Microsoft, and Berkshire Hathaway, the world’s four largest public companies.

The prince plans an IPO that could sell off “less than 5 percent” of Saudi Aramco, the national oil producer, which will be turned into the world’s biggest industrial conglomerate.

The fund will diversify into nonpetroleum assets, hedging the kingdom’s nearly total dependence on oil for revenue.

The tectonic moves “will technically make investments the source of Saudi government revenue, not oil,” the prince says. “So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”

On the other hand, Algeria another OPEC member is returning to the domestic bond market for the first time in two decades as the OPEC member seeks to offset the economic fallout from the drop in crude prices.

The North African nation is also trying to mobilize more than $15 billion in domestic liquidity and borrow from international financial institutions to help reduce its dependence on oil, Finance Minister Abderrahmane Benkhalfa said in an interview in Washington last week.

Borrowing will be mainly directed to specific projects rather than running state functions, and the government now has plans for up to 40 “large projects.”