What to make of Saudi Arabia’s Recent Shift in its Output Policy?

886  Views   |   Thursday, August 23, 2018

Oxfordenergy__Saudi Arabia is trying to manage the Brent price within a very narrow range of $70 to $80

What to make of Saudi Arabia’s Recent Shift in its Output Policy?

After a sharp price rise in April/May this year, which saw Brent trading at above $80/barrel for several days (reflecting output losses from Libya, Venezuela and Canada, the realization that the potential losses from Iran could be larger than originally expected and mixed OPEC signals about the future of the OPEC+ deal), the upward pressure on the oil price eased in July with the Brent structure flipping into contango. This may have come as a surprise to many analysts who were expecting oil prices to continue on their upward trajectory. Because, after all, with OECD stocks falling below the five-year average, spare capacity at very thin levels, oil demand still growing robustly, production in Venezuela continuing its decline, supply losses from Iran projected to exceed 1 million b/d, and general deterioration of the geopolitical backdrop, surely the Brent price should have broken the $80/barrel ceiling? Instead, the oil price has held in the $70-$75 range for most of July and into August 2018....................

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