Zero Hedge
0
All posts from Zero Hedge
Zero Hedge in Zero Hedge,

Saudi Rhetoric Sends Oil Prices To Two-Year High

Comments made by Saudi Arabia’s Crown Prince Mohammed bin Salman (MBS), sent Brent crude to its highest in more than two years (highest since July 2015), above $60 a barrel, Reuters reports. West Texas Intermediate was more impervious to the comments, but it also gained a few cents, to the highest in six months.

“The Saudis keep pressing for an extension of the output-cut deal through next year, so the market is feeding off that and we are seeing signs of tightening out there as a result of the program,” John Kilduff, a partner at Again Capital, told Bloomberg.

 

At the same time “the Iraq-Kurd situation is also getting the attention of the market. The volumes are down out of Ceyhan”

As OilPrice.com's Irina Slav notes, the comments themselves are of the Saudi garden variety, and include:

a) a stale reassurance that the Aramco initial public offering is still on track for its scheduled takeoff in the second half of 2018;

 

b) a vague pledge to do whatever it takes to support oil prices;

 

and c) a vow to quit its oil dependency and move beyond fossil fuels at some point.

No matter that the assurances have all been made before - the comments add to the already growing optimism about OPEC’s production cut deal, which will almost certainly be extended until the end of next year, after Russia’s Vladimir Putin and now MBS have backed an extension.

As for what will happen after December 2018 in case of an extension, that’s still a mystery, but this seems to be too far in the future for anyone to care about right now, or almost anyone.

Saudi Arabia’s Energy Minister Khalid al-Falih said earlier this week that “When we get closer to that (five-year average) we will decide how we smoothly exit the current arrangement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories.”

These comments suggest that the lower production may become something permanent as long as everyone in OPEC and its external partners agrees, but this is unlikely: Russia’s Alexander Novak publicly said that there are plans to boost oil production next year with or without an OPEC/Russia deal extension.

Finally, some context for this latest move...

All it took for Brent oil to hit $60 was for Saudis to say they back further OPEC cuts no more than 17,330 times so far this year

— Mark Constantine (@vexmark)