Oil Markets Embrace Saudi Arabia’s Bullish Stance

摘要

Oil markets have become a one-way bet these days, with Opec both cementing a floor under prices and keeping the door open for a continued rise. The producer group is leading the charge with coordinated output cuts, which, when paired alongside strong oil demand and rising supply outages, continue to shrink OECD inventories. Less slack in the system has left markets more attentive to mounting geopolitical risk, allowing Brent to flirt with $75 for the first time since 2014. Historically, such a pivot point might invite Saudi Arabia to start signaling that prices are getting too hot, reminding the market of the dangers of $100 oil. But the de facto Opec kingpin is not the price dove it once was (PIW Mar.26’18). Underpinning the oil price are Opec’s shifting goalposts on preferred inventory levels. OECD inventories are effectively at their five-year average levels, which was the group’s target when it first embarked on its rebalancing tour alongside several non-Opec nations, led by Russia. But this is no longer considered tight enough, with Saudi Arabia and others convinced — for now — that their alliance must continue to prevent the market from building back its stocks and incentivize more investment in medium-term supply (PIW Apr.23’18).