Saudi Arabia Looking for Crude Oil at $100 bbl
The world’s Top Crude Oil exporter Saudi Arabia will be happy to see crude rise to 80 – 100 bbl, a signal the Kingdom will seek no changes to an OPEC supply-cutting deal even though the agreement’s original target is in sight.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and several other producers began to reduce supply in January 2017 in an attempt to erase a glut. They have extended the pact until December 2018 and meet in June to review policy.
OPEC is closing in on the original target of the pact reducing industrialized nations’ Crude Oil inventories to their 5-year average. There is no indication yet that Saudi Arabia or its allies want to wind down the supply cut.
Over the past year, Saudi Arabia has emerged as OPEC’s leading supporter of measures to boost prices, a change from its more moderate stance in earlier years. Iran, once the OPEC price Hawk, now wants lower prices than Saudi Arabia.
Industry sources have linked this shift in Saudi Arabia’s stance to its desire to support the valuation of state Crude Oil company Aramco ahead of the Kingdom’s planned sale of a minority stake in an IPO (initial public offering).
The supply cut has helped boost Crude Oil prices this year to 73 a bbl, the highest since November 2014.
Crude Oil began a slide from above 100 in mid-2014, when growing supply from rival sources such as US Shale (tight) Oil began to flood the market.
But the Kingdom wants the rally to go further.
Industry sources said a desired crude price of 80 or even 100 was circulated by senior Saudi officials in closed-door briefings in recent weeks.
Once the Aramco share float is done, Riyadh would still want higher prices to help fund initiatives such as Vision 2030, an economic reform plan championed by Crown Prince Mohammed bin Salman.
“Saudi Arabia wants higher Crude Oil prices and yes, probably for the IPO, but it isn’t just that,” an OPEC source said.
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