Saudi Arabia’s budget needs are causing Saudi Arabia to push for Crude Oil prices of at least $70 bbl this year, industry sources say, even though US Shale Oil producers could benefit and Riyadh’s share of global markets might be further eroded.
Riyadh, OPEC’s de facto leader, said it was steeply cutting exports to its main customers in March and April despite refiners asking for more of its Crude Oil.
The move defies President Trump’s demands for OPEC to help reduce prices while he toughens sanctions on producers Iran and Venezuela.
The export cuts are designed to prop up prices, sources close to Saudi oil policy say. Saudi officials say the Kingdom’s output policies are intended to balance the world market and reduce high inventories.
“The Saudis want oil at $70 at least and are not worried about too much shale oil,” said 1 industry source familiar with Saudi oil policy.
Officially, Saudi Arabia, which plans to raise government spending to boost economic growth, does not have a price target. It says price levels are determined by the market and that it is merely targeting a balance of global supply and demand.
Even a price of around $70 a barrel would not balance Saudi Arabia’s books this year, according to figures cited by Jihad Azour, director of the International Monetary Fund’s Middle East and Central Asia department in February. For that, he said, Riyadh needs oil prices at $80-$85 a barrel.
Saudi Arabia, the world’s largest oil exporter, also wants to make sure it avoids a repeat of the Ys 2014-2016 Crude Oil price crash below $30 bbl, sources familiar with Saudi policy said.
Saudi Arabia has also been advocating an extension of OPEC-led supply cuts beyond June until the end of Y 2019.
“With budget needs at above $85 bbl, the Saudis desperately need prices at above $70 bbl.
The United States and Russia produce 12-M and 11-M bbl respectively. Unlike Russia, the United States pumps at will via its commercial energy sector, led by Shale. The International Energy Agency forecasts its output will soar by another 4-M BPD in the next 5 years.
Those increases would be likely to outpace the growth of global demand and give Washington an even bigger share of the global market, making it a bigger exporter than Saudi Arabia.
Riyadh has long been a close ally of the United States and the 2 countries have coordinated Crude Oil policy more closely since Donald Trump became President.
Last year, Saudi Arabia raised output steeply under pressure from Washington. But it later heard that the United States had granted Iranian Crude Oil customers unexpectedly generous waivers and the price subsequently fell to $50 bbl.
“The Saudis do care about President Trump, but they cannot do whatever he says every time,” an OPEC source said.
|COMMODITY||LAST||CHANGE||% CHANGE||EXP DATE||TIME|
|NYMEX Crude Oil »||58.85 USD||-0.19||-0.32%||Apr 19||12:00AM EDT|
|ICE Brent Crude »||66.88 USD||-0.15||-0.22%||Mar 19||8:00PM EDT|
HeffX-LTN’s overall technical out look for Crude Oil is Bullish in here.
Have a terrific week.