The price of Brent exceeded 78 dollars after hearing the news that Saudi Arabia decided to voluntarily reduce its daily oil production by 10% in July to 9 million barrels. barrels which is also the lowest level since June 2021
By Chrysostomos Tsoufis
“The speculators, as in every market they are here to stay but I warn them they will hurt, they hurt in April. I don’t have to show my cards, I’m not a card player but I would tell them to be careful.”
That’s it the energy minister of saudi arabia, Prince Abdulaziz Bin Salman two weeks ago at the Qatar Economic Forum, essentially “showing” his cards.
However the markets reacted as if they didn’t see what was coming. The price of brent exceeded all 78 dollars, an increase of more than 2% while the West Texas variety also exceeded $73 again, on the news that Saudi Arabia decided to voluntarily reduce in July (and from then on seeing and doing) by 10% the daily oil production at 9 million barrels which is also the lowest level since June 2021. The decision was taken during the OPEC+ meeting at the weekend which decided to extend the production cuts decided in April, also for 2024.
The April cuts did not have the expected results.The prices of black gold indeed initially they increased, but then as half of Europe is flirting with recession and the Chinese tiger isn’t exactly roaring, demand wasn’t as expected so they started to pull back to hit a low since September 2021 around $71 just before the weekend.
But a level that does not satisfy its purpose Kingdom of Saudi Arabia which according to the IMF wants a price of at least $80 so that the royal family can finance without problems the huge investment plans it has set in motion. So acting – as we have written before on – as a global oil bank to reduce its production and sacrifice a share of the world market, not to lead to a rally in oil prices but more to put a floor.
The analysts are divided against this alone and all of you of Riyadh. Some believe that this move by S. Arabia will also be a hole in the water because it was unable to rally the rest of the OPEC+ members in a meeting that was characterized as tense – it is noteworthy that reporters from Bloomberg, Reuters and the Wall Street Journal were not allowed into the building. And not only did he not rally the other members, but some are going their own way. The UAE was allowed to increase its production by taking a fraction of the percentages of African countries that pump less oil anyway even from their shares of reduced production.
And in Russia it was not even asked to reduce its production – it is doubtful that it even complied with the April decisions –. This may also have something to do with the large revenue losses it records from oil and natural gas, about 30 billion rubles below budget estimates.
But some believe that the movements of S. Arabia show that it is determined to stabilize the entire oil market even on its own if necessary. And if the estimates turn out to be true and oil demand reaches record levels from June in the Northern Hemisphere, then it is possible that it will succeed. And not just to stabilize the market but also to achieve prices close to $100/barrel towards the end of the year.
The ….game has just begun
I am Janice Wiggins, and I am an author at News Bulletin 247, and I mostly cover economy news. I have a lot of experience in this field, and I know how to get the information that people need. I am a very reliable source, and I always make sure that my readers can trust me.