Oil's Bullish Signals Show Saudi Arabia's $80 Goal Within Reach

Hugh Fox
April 20, 2018

"Top oil exporter Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel, three industry sources said, a sign Riyadh will seek no changes to an OPEC supply-cutting deal even though the agreement's original target is within sight", reports Reuters.

After API's Tuesday estimate of a 1.047-million-barrel crude oil inventory draw pushed prices higher, the Energy Information Administration added optimism by confirming a draw, albeit a smaller one, at 1.1 million barrels.

Still, the cartel and Kremlin want to drive prices even higher and offset the United States shale oil boom, so they are likely to extend the supply quota plan beyond this year.

Futures extended gains after weekly government data showed USA crude stockpiles fell by 1.1 million barrels.

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Brent for June settlement climbed $1.90 to end the session at $73.48 on the London-based ICE Futures Europe exchange.

OPEC wants to lure more producers to join the output-reduction deal, U.A.E. Energy Minister Suhail Al Mazrouei said in a Bloomberg Television interview.

The rally comes on the back of oil supply concerns.

OPEC and its partners meet on June 22 to review policy and before then a ministerial monitoring panel gathers in Jeddah, Saudi Arabia, on April 20. The group's goal of reducing global stockpiles to their five-year average is almost reached, according to people with knowledge of the data.

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Talk that Saudi Arabia has its sights on $80-$100 USA a barrel oil again and of more U.S. sanctions on Russian Federation ignited a rally in commodities and resource stocks on Thursday, though the potential boost to inflation hit fixed-income assets.

Elsewhere, Saudi Arabia has been hinting the OPEC could extend production caps into next year.

Fundamentals are indeed weighing on prices: US oil production exceeded 10.5 million barrels daily two weeks ago and most likely continued to increase last week as well.

US gasoline demand surged to a record high of 9.9 MMbbl a day before the summer driving season when consumption typically peaks. The EIA reported that gasoline demand hit a record of 9.857 million barrels a day last week, up 584,000 barrels.

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Further push to the bullish momentum was engaged when it become known that Saudi Arabia, the world's most influential oil producer, is seeking to push prices even higher.

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