Saudi Arabia announces more production, the WTI drops, but then rebounds …
A month ago, Saudi Arabia shocked the world when it announced it would unilaterally cut one million barrels a day of crude oil production starting next month in an effort to raise prices. The plan worked – perhaps too well – and quickly pushed Brent crude oil well above $ 60, or the price level where, as we reported over the weekend, US fracking production tends to get back on track.
OPEC always tries to crowd out the competition. By the end of last week it was clear that prices had reached a critical value for OPEC +, in which the cartel is starting to lose market share, and this should not happen.
That is why, as the WSJ reports, Saudi Arabia has announced to increase oil production in the coming months, reversing the cut it decided recently and adding another million barrels of crude oil to production. The new production level will be announced next month and will take effect from April, as the cut was decided to expire on March 31st.
Saudi Arabia's move comes at a time when demand is expected to pick up as the pandemic recedes and global trade resumes. Without an increase in production this would have led to a further increase in the price, but the effect that will be produced on the price in any case cannot be predicted.
What does Saudi Arabia hope to achieve from this move? Mainly two results:
- first of all to regain shares in relation to competitors;
- therefore delaying the growth of oil produced in the US, even counting on Biden's moves.
We will see if the price will stop rising or if further action is needed.
POST SCRIPTUM. The "Environmental" variables, that is the Arctic cold wave that is ravaging the US as far as Texas, has prevailed on the downward push for the Saudi announcement.
The price jumped after the announcement of a sudden drop in the available quantities of crude oil.
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The article Saudi Arabia announces more production, the WTI goes down, but then rebounds… comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/larabia-saudita-annuncia-piu-produzione-il-wti-scende/ on Thu, 18 Feb 2021 07:40:33 +0000.