Saudis and Russians rush to save market, 2 weeks early By Investing.com



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By Barani Krishnan

Investing.com — The OPEC+ meeting is two weeks away, but the Saudis and Russians are determined not to sit back and let the market crash.

In a quick response to a Wall Street Journal report on Monday, Saudi Arabia’s Energy Minister Abdulaziz bin Salman denied that under his leadership, the 23-nation OPEC+ alliance is working on increasing output by 500,000 barrels per day to announce at the Dec. 4 meeting. .

If the WSJ report is correct, it would be a reversal of the 2 million bpd cut OPEC+ announced for November. This would be a small increase in barrels but a big one in terms of goodwill, would do wonders for Saudi-US relations, but unfortunately would further depress already free-falling crude prices.

Both New York-traded WTI, the benchmark for U.S. crude, and London’s global oil benchmark hit year-to-date lows in early trading on Monday, driven in part by the WSJ story.

The Minister of Energy of Saudi Arabia, Abdulaziz, said in a statement issued by the state news agency SPA that the news is not true.

“It is well known that OPEC+ did not discuss any decisions before the meeting,” Abdulaziz said, referring to the December 4 meeting.

He added: “The current cut of 2 million barrels per day by OPEC+ will continue until the end of 2023, and we are always ready to intervene if further measures are needed to reduce production to balance supply and demand.”

And as in the same news, Russian Deputy Prime Minister Alexander Novak, Abdulaziz’s closest ally outside the Gulf in OPEC+, also came with his answers to the decision that Western countries will make on December 5 regarding the prospective import ban and price limit for Russian oil.

Novak reiterated his position not to sell oil to countries that would participate in the price hike, a plan devised by the West to limit the amount of money Moscow can finance in Russia’s war against Ukraine. Russia’s deputy prime minister also said something else that helped crude oil prices return to positive for the day: Russia may also cut oil production if oil prices are curbed.

Novak added that “the decrease in supply will be the result of the increase in the price of Russian oil.”

WTI, which hit a session low of $75.30 on Monday and hit its lowest level since January, recovered most of its losses by midday in response to comments from Abdulaziz and Novak. A barrel of US crude oil decreased by 0.4% and decreased by 35 cents to $79.73.

Sunil Kumar Dixit, chief technical strategist at SKCharting.com, said oversold conditions could pull WTI back to its 100-week Simple Moving Average ($81.30). “But it should break above $80 and close. Otherwise, it is always in danger of moving towards lower levels like $72.50 and $71”.

Global Brent crude was down 17 cents, or 0.2%, at $87.45 a day earlier, after falling to $82.36, its lowest level since February.

“The coordinated response we’ve had from the Saudis and Russians in denying the WSJ report and undermining oil sales is interesting,” said John Kilduff, founding partner of New York energy hedge fund Again Capital. “The OPEC+ meeting is two weeks away and they have decided that there is too much risk on the price front if they keep mum until then.”

Crude oil prices also briefly entered contango mode on Friday for the first time since 2021, a market structure that defines weakness. Based on this dynamic, the first month oil contract is traded at a discount to the next month in the futures market. . Although the difference itself is small, it forces buyers who want to take a position in oil when the contract expires to pay more to switch to a new one-month contract.

Now, with such negativity reigning in crude oil, all eyes are on what the OPEC+ alliance of oil producers will do at its December 4 meeting.

OPEC+, or the 13-member Organization of the Petroleum Exporting Countries led by Saudi Arabia and 10 other oil producers led by Russia, agreed at its previous meeting to cut output by 2 million barrels per day to boost Brent. and US crude oil prices have fallen sharply from March highs.

Immediately after the OPEC+ decision, Brent fell from below $82 per barrel to $100 a day (it had reached almost $140 in early March). WTI rose from $76 to $96 (WTI was just over $130 in March). Both benchmarks have lost all their gains in the past two weeks, raising questions about whether OPEC+ will cut further to lift the market again.

Abdulaziz’s comments on Monday hinted at the possibility of further cuts, particularly when he said the alliance would be “ready to intervene” if “further measures by cutting output to balance supply and demand” were needed.

The OPEC+ cut of 2 million barrels was not well received by the US.

The WSJ reported on Monday that U.S. officials are looking forward to the Dec. 4 OPEC+ meeting with some optimism, but Saudi-U.S. relations have hit a low point this year amid disagreements over oil production.

Talk of a production boost came after the Biden administration told a federal judge that Saudi Crown Prince Mohammed bin Salman should have sovereign immunity from a US federal lawsuit over the brutal killing of Saudi journalist Jamal Khashoggi. The immunity ruling amounted to a concession to Mohammed, who cemented his position as the kingdom’s de facto ruler after the Biden administration sought to isolate him for months.

The WSJ acknowledged in its report that it would be an unusual time for OPEC+ to consider an output increase, with global oil prices down more than 10% since the first week of November on Covid headlines from China.

Rising coronavirus cases in China have prompted fresh lockdown measures in some of the country’s biggest cities, raising concerns about slowing crude demand in the world’s biggest oil importer. The country is currently battling its worst COVID outbreak since April, with several cities under lockdown. A report earlier this month said several Chinese refiners were asking Saudi Aramco (TADAWUL:) Supplying less oil in December, which may indicate a slowdown in oil shipments to the country. China also increased its refined fuel export quotas, potentially indicating a glut of crude oil inventories due to lower demand.

However, some OPEC+ representatives apparently told the WSJ that the output increase could come in December in response to expectations that oil consumption would typically increase in the winter. Oil demand is expected to increase by 1.69 million barrels per day to 101.3 million barrels per day in the first quarter of next year compared to the average level of 2022.

Saudi Arabia’s Energy Minister Abdulaziz has also said in the past that the kingdom will supply oil to “everyone who needs it”.



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