Saudi wants to maintain crude in $70 to $80 band Oil drops towards $77 as threat of US storm eases
dubai — Saudi Arabia wants oil to stay between $70 and $80 a barrel for now as the world’s biggest crude exporter strikes a balance between maximising revenue and keeping a lid on prices until United States congressional elections, Opec and industry sources said.
After announcing the flotation of Saudi Aramco in 2016, the kingdom began pushing for higher crude prices partly to help maximise the valuation of the state oil company ahead of an initial public offering (IPO), originally scheduled for 2018.
That changed in April when US President Donald Trump put public pressure on Riyadh to keep crude prices in check, wanting to stop US fuel costs rising ahead of the US midterm elections in November.
Now, even though the IPO has been put off, Saudi Arabia still wants to keep oil prices as high as possible without offending Washington, the sources said. Saudi needs cash to finance a series of economic development projects.
Opec and Saudi Arabia do not have an official price target and are unlikely to adopt one formally.
“The Saudis need oil at about $80 and they don’t want prices to go below $70. They want to manage the market like this,” one of the sources told Reuters.
An informal target of $70 to $80 raises the prospect of Saudi Arabia making regular tweaks to its output to influence the cost of crude as the market responds to other factors affecting global supply and demand.
One industry source said it may have done precisely that last week.
With Brent heading towards $80 a barrel, Saudi Arabia told the market about an increase in its production last month sooner than it would have usually released such information, the source, who follows Saudi output policy, said.
“The Saudis will probably put a few more dampening signals out, given where prices have gone,” the industry source said. The aspiration for $70 to $80 is similar to that of other producers within the Organization of the Petroleum Exporting Countries. Algeria, for example, says it sees $75 as fair. “Everybody has been talking about these kinds of numbers,” said an Opec delegate from outside the Gulf. Brent crude has fluctuated between $70 and $80 since April 10. After hitting $70.30 on August 15 the oil price has climbed steadily to touch $79.72 on Tuesday.
Earlier this year, Riyadh hoped to see oil prices above $80 and was ready to continue with a supply cut pact until the end of 2018, only to make a U-turn after Trump called on Opec in April to boost supplies. london — Oil extended losses on Wednesday, falling towards $77 a barrel, as a tropical storm hitting the US Gulf coast weakened, offsetting support from forecasts of lower US inventories and sanctions against Iran.
Crude had jumped the previous day as oil companies shut dozens of offshore platforms in anticipation of damage from tropical storm Gordon. But by Wednesday the storm was weakening, reducing its threat to oil producers.
“Tropical storm Gordon made an uneventful landfall after dashing expectations that it would strengthen to a hurricane,” said Stephen Brennock of oil broker PVM. “Instead, it weakened considerably and deviated away from oil-producing areas, which, as a result, has taken the wind out of bulls’ sails.”
Brent crude fell $1.02 to $77.15 a barrel by 0949 GMT. On Tuesday prices had cliumbed to $79.72, their highest since May. US crude was down $1.05 at $68.82.