Saudi Arabia declined any claim of a possible hike in oil exports. The World, however, might not need them after all.
Oil prices have gone on a roller coaster ride on Monday as conflicting OPEC reports came out during the day. Earlier in the afternoon, a false report came out stating that the Organization of Petroleum Exporting Countries (OPEC) was planning on increasing oil outputs.
The organization, de facto controlled by Saudi Arabia, had slashed oil exports back in October, sending prices on a hike. The move was a clear challenge to the United States, whose relations with the Gulf country had deteriorated over the years.
It was also a wink to Saudi Arabia’s new major partners: Russia and China.
On Monday, however, the Wall Street Journal reported that Saudi Arabia was considering increasing oil exports by 500.000 barrels a day. The decision would have been taken at the next OPEC meeting on December 4th.
This plunged oil prices by $5 a barrel to $83. Oil futures reached the lowest levels since January at $78.39 for December (WTI). It almost looked like the contango level could be reached, where current oil prices are lower than future contracts already established.
After only a couple of hours, however, the Saudi Arabia press agency denied such claims. “It is well known, and no secret, that OPEC+ does not discuss any decisions ahead of its meetings,” Prince Abdulaziz bin Salman said. “The current cut of 2 million barrels per day by OPEC+ continues until the end of 2023 and if there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene.”
What the future will hold
As a matter of fact, Saudi Arabia might not need to increase exports at all. China, Saudi Arabia’s biggest partner and oil importer, has recently reported the first Covid death since may. This will likely spark a new wave of strict Covid restrictions, decreasing both import and exports further.
Furthermore, the G7 recently agreed upon a price cap on oil prices. Even though it might not be as powerful as it sounds, it will surely have an effect on OPEC’s decisions. The price cap is aimed at Russian oil only, but it includes third party sellers as well.
This means that countries like India, China or even Saudi Arabia cannot buy Russian oil at a low price and sell it higher.
In light of all of these developments, Goldman Sachs lowered the fourth quarter forecast to $100 a barrel, $10 less than previously predicted.
