Saudi Arabia is looking to manage the oil market in a way that would keep oil prices in the $70 to $80 band for the time being, as the Kingdom wants a floor under prices to monetize oil exports and at the same time keep a ceiling until at least the U.S. mid-term elections in November, Reuters reported on Wednesday, quoting sources at OPEC and the industry.
Early this year, Saudi Arabia was said to be aiming for oil at $80 a barrel and even higher in order to stoke up the valuation of oil giant Saudi Aramco ahead of what was hyped to be the world’s largest IPO ever.
In April, however, U.S. President Donald Trump started slamming OPEC for keeping oil prices “artificially very high”, and in the latest tweet aimed at OPEC in early July, he demanded that OPEC “REDUCE PRICING NOW!”
OPEC’s leading producer and de facto Saudi Arabia—which early this year had vowed to keep the production cut pact intact until 2018, saying that “If we have to err on over-balancing the market a little bit, so be it”—agreed in June with fellow OPEC members and the Russia-led group of non-OPEC producers part of the pact to ease compliance rates, in other words to boost production.
Then, last month reports surfaced that the Aramco IPO had been called off.
According to Reuters’ sources, even with the listing plans (probably) scrapped, Saudi Arabia aims to keep oil prices as high as it can without offending the U.S. Administration, with which it has built closer ties under President Trump. Related: The Bearish Case For Oil
“They need cash. They have plans and reforms and now the IPO is delayed. But they don’t want anyone else talking about oil prices now. It’s all because of Trump,” one source told Reuters.
The unofficial $70-80 Saudi price target for oil may have been the reason behind Saudi Arabia’s reporting of oil production over the past two months, an industry source following the Kingdom’s oil production policies told Reuters.
As Brent Crude prices were heading to $80, Saudi Arabia told the market last week that it had raised production in August, sooner than the Saudis would have typically leaked such information, according to the industry source.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Saudi Oil Income Could Reach $161B This Year
- Analysts: Iran May Use Secret Oil Shipments To Skirt U.S. Sanctions
- Emerging Market Contagion Threatens Oil Market