Crude prices slumped, rebounded sharply and then lost their gains all in the space of a couple of hours Monday after Saudi Arabia — the world's largest export of petroleum — said it would cooperate with all oil producing countries to help stabilize the oil market.
Ali bin Ibrahim Al-Naimi, the Saudi minister for petroleum and mineral resources, spoke at the Seminar on Future of Energy in the Middle East and North Africa in Bahrain, according to a statement from the Saudi press agency.
"Perhaps it would be fitting here to mention the role of the Kingdom of Saudi Arabia in the stability of the oil market, and its continued willingness and prompt, assiduous efforts to cooperate with all oil producing and exporting countries, both from within and outside OPEC, in order to maintain market and price stability," Al-Naimi said.
At a Saudi cabinet briefing on Monday, stability in the oil market was also mentioned.
"The Cabinet stressed the Kingdom's role in the stability of the oil market, its constant readiness and continuing pursuit to cooperate with all oil producing and exporting countries," according to another statement from the Saudi press agency based on the meeting.
The two statements were viewed by the market as a sign that Organization of Petroleum Exporting Countries (OPEC) — which is dominated by Saudi Arabia — might alter its policy of holding oil output in the face of slumping demand.
The organization's official output ceiling remains at 30 million barrels per day. OPEC's members will meet on December 4 in Vienna. Until Monday, there have been few signs that of plans to cut production at the meeting.
Crude prices staged a sharp turnaround on Monday's reports, with Brent trading at around $45 afterwards and light crude at just under $42. The commodities have since pared some of those gains: down 20 and 60 cents respectively. Prices had previously been down on the day and, last week, WTI crude fell below the psychologically important $40 mark for the first time since August.
The statements from Saudi Arabia came after another OPEC oil minister — this time from Venezuela — resurrected a warning from Goldman Sachs of a possible slump to near-$20 a barrel.
Venezuelan Oil Minister Eulogio del Pino told journalists on Sunday that oil prices could plunge to the mid-$20s next year, if OPEC did not change its current policy, according to media reports.
"We cannot allow that the market continue controlling the price," del Pino told journalists at the Gas Exporting Countries Forum in Tehran, according to Bloomberg.
"The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC."
Del Pino's words bore echoes of a forecast by Goldman Sachs, first made in September, which suggested that oil could tank to $20 per barrel — although this is not the bank's baseline scenario.
"While we are increasingly convinced that the market needs to see lower oil prices for longer to achieve a production cut, the source of this production decline and its forcing mechanism is growing more uncertain, raising the possibility that we may ultimately clear at a sharply lower price with cash costs around $20 a barrel Brent prices," Goldman said in a report.
Despite its warning, Goldman said there was a less than 50 percent chance of oil falling to $20 per barrel. Instead, its base-case scenario for 2016 was $45 per barrel.
Meanwhile, Renaissance Capital forecast that Brent crude would average $60 per barrel in 2016 on Monday. That's more optimistic than Goldman, but still a 25 percent cut on its previous forecast.
As well as concerns about demand-supply mismatch, oil prices remain pressured by the rise in U.S. dollar — in which oil is usually quoted — which hit seven-month highs on Monday.
This appreciation, coupled with ongoing fears of the impact of China's economic slowdown on demand, has hit a broad array of commodities, with base metals trading sharply lower on Monday.