Over the last six weeks, that rally has unwound in spectacular fashion, with oil prices tumbling into a bear market. The pullback has several causes, including a weaker demand outlook for crude and a wider market sell-off, but analysts say OPEC‘s output hike earlier this year and the sanctions waivers play a major part in the oil price plunge.
“In early October there was this expectation that a lot of Iran’s barrels were going to come off the market, and so essentially Saudi Arabia was duped into increasing production,” said Matt Smith, head of commodities research at tanker-tracking firm ClipperData.
Smith says it’s uncertain the situation has unfolded exactly as the Trump administration intended, but it has ultimately worked out in the president’s favor — though potentially at a cost to U.S.-Saudi relations.
“They’ve really done a good job of decreasing that oil price, but it has been at the expense of some of those relations there, because surely the Saudis have got to be pretty unhappy with the way things have played out here.”
Saudi Energy Minister Khalid al-Falih acknowledged this week that Iran’s exports didn’t fall as much as expected.
He also announced that Saudi Arabia will ship 500,000 fewer bpd in December and said OPEC and its allies may cut production by 1 million bpd next year. That decision could come in a few weeks when OPEC, Russia and other producers meet to review their current policy of easing output curbs that have been in place since last year.
Be the first to comment