While crude oil is off its recent lows, Saudi Arabia appears to be digging in, in its battle with Russia to either broadly cut production or inflict pain on higher cost producers, writes Phil Flynn.
There may be no end in sight to the oil price war that sent global oil prices tumbling yesterday. Still, talk of economic stimulus as well as pressure by the Trump administration on Saudi Arabia and Russia could give some hope of a bottom. While the oil market is not out of the woods just yet, if pressure by the Trump Administration changes Saudi and Russia’s hearts and minds, we could avoid a retest of those 2016 lows.
Reports are breaking that President Trump called Saudi Crown Prince Mohammad Bin Salman (MBS) to discuss his immature and impetuous act in going into a ballistic oil price war.
The Department of Energy (DOE) also rebuked OPEC plus by saying that attempts by state actors to manipulate and shock oil markets reinforce the importance of the role of the United States as a reliable energy supplier to partners and allies around the world. The United States, as the world’s largest producer of oil and gas, can and will withstand this volatility. The growth of the unconventional oil and gas industry in the United States has led to a more secure, resilient and flexible market. America likely will remain the number one energy producer in the world.
Yet despite this pressure, Saudi Arabia was digging in its heels. Reuter’s reported that Saudi Aramco has said it will lift the volume of oil supplied to the market to 12.3 million barrels per day (bpd) next month, which is more than 2.0 million bpd above its current output and 0.3 million bpd above its sustainable capacity. Increasing supply rapidly by withdrawing oil from inventories and announcing it publicly is intended to maximize downward pressure on prices and the pain felt by all oil producers. This helped slow oils rally.
Russia for their part also said they could raise output by 500,000 barrels but was willing to restart talks with OPEC. The Saudi’s though said they saw no reason for a meeting unless Russia committed to a cut.
Just buckle up for a wild energy ride. In Norway if low energy prices were not enough of a problem reports that its defense minister may have been exposed to the Coronavirus.
Trade strategy may be key to ride out the crazy moves that will come with the headlines so keep in touch with our daily analysis. Makes sure you are getting my Daily Trade Levels! Read Phil’s energy report at Price Futures Group. Twitter: @energyphilflynn | Facebook: Phil Flynn
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