Dubai: Saudi Arabia’s assurance that they will stabilise the oil market is expected to keep prices supported for now, but it may not be enough to break crude out of its current price range.

Khalid Al Falih, who is Minister of Energy, Industry and Mineral Resources of Saudi Arabia and chairman of Saudi Aramco, said last week that oil producing countries will discuss potential action to stabilise prices during a meeting late next month in Algeria. The comments triggered a 2 per cent rally in prices that caused Brent crude to trade above the $46 (Dh168.8) per barrel mark on Friday. For the week, Brent crude gained 5 per cent, its biggest weekly gain since April. West Texas Intermediate also closed 2.01 per cent higher at $44.49 per barrel.

“We don’t see prices going above $45-46 in this week. The main focus would be the upcoming meeting in September. The expectations are very low given that record high output from Saudi Arabia, and Iran ready to defend its market share,” Naeem Aslam, chief market analyst with Think Forex told Gulf News by phone from London. However, rising inventories and rig counts in the US may keep the price upside limited, Aslam added.

The assurances from Saudi Arabia is far cry from the Doha outcome in April, when Opec’s biggest oil producer said a deal was not possible without Iran, which has been boosting output to defend market share.

“We do not see Opec taking any action at this stage but the delay to the process of achieving balance will ensure continued comments from members to prop up the price as we approach September,” Ole Hansen, head of commodity strategy at Saxo Bank said. Oil has yielded negative returns in September in the past five years.

Short positions

“Saudi Arabia’s rejection of a deal in Doha made the market take note of this verbal about turn. A new deal to support the market is not expected but once again traders will be thinking twice about going aggressively short and that was probably the main goal of the statement,” Hansen said.

Hedge funds have been witnessing record short or sell positions in crude oil. Hedge funds increased their short position in West Texas Intermediate crude to 218,623 futures and options combined during the week ended August 2, the highest since 2006.

But Khalid Al Falih in an interview published in Saudi Press Agency said, “the large positioning in the market has caused the oil price to undershoot” and continued by saying that this was unsustainable as higher prices were needed to reverse the declines in investment and output.

Analysts see $45 per barrel as the critical point when it would be profitable for US crude to come online.