Darren Kugler
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Darren Kugler in Commodities,

Should oil really be trading above $60 a barrel

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Saudi Crown Prince Mohammed bin Salman has injected some geopolitical risk premium into oil prices.

The oil rally gained momentum this week, taking both U.S. crude and its international counterpart to 28-month highs as political and diplomatic turmoil around Saudi Arabia added a risk premium. However, some analysts argue that bulls are getting ahead of themselves by underestimating how quickly U.S. shale producers will respond to the rise in prices and overestimating how effective efforts by major oil producers to curb production will be in taming a global oil glut. “Oil is already much too expensive even if the latest developments in Saudi Arabia justify a certain risk premium on the oil price,” wrote Eugen Weinberg, head of commodity research at Commerzbank, in a Friday note.