With so many potential sources of support the question remains why have we not seen a bounce already. Saudi Arabia and especially its crown prince have come under international and domestic pressure since the murder of Jamal Khashoggi in Istanbul on October 2, the day before Brent crude oil peaked at $86.7/b.
These developments have left the Kingdom weak in the eyes of the wold and dependent on support from President Trump. A dependency which has come at a price, namely the promise to pump. Just like the rest of the oil market, Saudi Arabia was blindsided by the US decision to allow eight countries to continue buy oil from Iran after the reintroduction of sanctions in early November. This decision, combined with the increase in production, left the market with nowhere to go but down and fast.
The renewed weakness today came after Russian president Putin, while praising the Saudi Crown Prince for the success of the Opec+ agreement, also said that Russia was “absolutely fine” with oil prices around $60/b. Russia has due to its three-year average rule based its 2019 budget on an oil price around $43/b while Saudi Arabia is in need of a price closer to $90/b to meet its budgetary requirements. This weekend Putin will hold talks with the crown prince in Buenos Aires and the market will be looking for signs that they will do a repeat of the G20 meeting in September 2016 which laid the foundation for the Opec+ agreement to cut production.
First up, however, we have the Weekly Petroleum Status Report from the US Energy Information Administration (EIA) at the usual time of 15:30 GMT. A tenth consecutive and counter-seasonal rise in crude oil stocks was reported by the American Petroleum Institute last night. But instead of weakening further the market took some comfort from a 2.6 million barrel drop in gasoline stocks before trading lower in response to the above mentioned comments from Putin about oil at $60/b.
The result and immediate reaction to the EIA report will be posted on my twitter feed
@ole_s_hansen.
