Saudi Arabia Makes a Push for $100 Oil
Comment of the Day

August 23 2022

Commentary by Eoin Treacy

Saudi Arabia Makes a Push for $100 Oil

This article for Bloomberg may be of interest to subscribers. Here is a section:

For long, Saudi Arabia pretended it didn’t target oil prices. The job of OPEC+ was all about matching supply with demand. Focus on fundamentals, and leave prices to the market, it used to say.

On Monday, in an unusual intervention, Saudi Energy Minister Prince Abdulaziz bin Salman indicated he didn’t like the yo-yo pricing he saw in the oil market. The problem, he said in a written interview with Bloomberg News, is that the physical and financial markets have “become increasingly more disconnected.”

Left unsaid, but clearly implied, is the real concern: oil prices were getting too low – and in the view of Riyadh, for no good reason.

With Brent falling toward a six-month low of $90 a barrel last week, Prince Abdulaziz said “cutting production at any time” was an option for OPEC+. The Saudi royal is a veteran policymaker, who knows very well the impact of those words. If there was any doubt, when the state-run Saudi Press Agency published its own version of the interview, it elevated the “cutting production” remark into the headline.

Eoin Treacy's view

The release from the USA’s strategic reserve began in March and is due to end in early October; less than six weeks from now. On Monday, the reserve hit its lowest level since 1985. That suggests ability of OPEC+ to influence the market will improve soon and the USA will need to buy a lot of oil when prices are cheaper to rebuild the reserve.

Brent crude oil reversed an early decline yesterday to finish in positive territory and improve on that performance today. If Saudi Arabia is willing to support the $100 level, that suggests stabs on the downside will be buying opportunities for as long as it lasts.

The Energy SPDR is rebounding from the region of the trend mean to sustain the medium-term uptrend.

Black Stone Minerals is an oil and gas royalties play and yields 10.3%. The share has rebounded even stronger than XLE.

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