Positive developments will keep a floor on crude prices
We are reiterating our bullish outlook for oil prices as the bulls remain in control. WTI crude is up 1.57 per cent to $53.07/ bbl after reports from Saudi Arabia signalled that the Kingdom has complied with the cuts, and is considering cutting further below 10 mmb/d. This report comes after a week of mixed developments out of the US as well as reports from other Opec members. We are expecting continued developments from the crude markets to remain positive.
We’ve noticed the fact that market participants have shifted from Opec sceptics to Opec cheerleaders. We initially expected Opec to cut production ahead of its November meeting. Saudi Arabia recently mentioned that it has complied with the cuts and is even considering cutting to below 10 mmb/d. Saudi Arabia Oil Minister Khalid al Falih was quoted as stating: ‘Oil production now is below 10 million so far,’ ‘So, we’re going the extra mile to lead our colleagues within and outside of Opec to make sure that the market sees that there’s serious action in place.’
Saudi Arabia further added fuel to the bullish fire under markets by stating that it might consider extending the cuts after the June deadline. ‘We have been moving towards a re-balanced market for some time — too slowly to my liking,’ Al Falih said. ‘The pace of re-balancing will be accelerated due to the recent agreements within Opec and with our party from outside’ the group. ‘We will consider renewing’ the agreement after six months, he said. Luckily for oil investors, Saudi Arabia isn’t the only one participating in the cuts. News from Kuwait, the UAE, and Iraq has also suggested member states have complied with the cuts. We are expecting positive data in late January and early February to show initial signs of cut compliance, fuelling another rally in crude prices. [Nima Karamlou – Seeking Alpha]