Oil Up As Saudi Minister Tells Traders Not To Gamble With OPEC

By Barani Krishnan

Investing.com - Crude prices rallied for a third straight day on Thursday as OPEC+ appeared to have full cooperation from its partners on production cuts to support the market, with de facto leader, Saudi Arabia’s energy minister, even warning traders not to gamble against the alliance.

“Those who want to gamble on the oil market will be ouching like hell,” said Prince Abdulaziz bin Salman, who decides on the energy policy of the world’s most influential oil producing country, said, adding: “I will make this market jumpy.”

Just two days ago, the Saudi-steered and Russia assisted alliance of 23 oil producing nations seemed to be in a flux over how to handle a sudden collapse in crude prices to below the key $40 per barrel level due to continued fallout for energy demand from the coronavirus. 

The end of the peak summer driving season in the United States has also cast doubts about gasoline consumption, while some OPEC+ members such as Iraq — and most notably Russia — were falling short of production cuts pledged in April.

The Paris-based International Energy Agency said on Monday that it expects global oil demand growth to fall by 8.4 million barrels per day year-on-year to 91.7 million bpd. That is a deeper contraction than the 8.1 million bpd decline previously estimated.

In fact, OPEC itself announced this week a lower forecast for oil demand growth, citing weaker-than-expected recovery in India and other Asian countries, and warning that risks remain “elevated and skewed to the downside” for the first half of next year.

In a closely-watched monthly report published Monday, the Vienna-based group downwardly revised its outlook for global oil demand to an average of 90.2 million barrels per day in 2020. That’s down 400,000 bpd from the previous month’s estimate and reflects a contraction of 9.5 million bpd year-on-year.

But in Thursday’s live streamed virtual meeting, Prince Abdulaziz along with Alexander Novak and Suhail Mohamed Mazrouei, his counterparts from Russia and UAE, respectively, sought to assure that all the “cheaters” within OPEC will make up for production quotas flouted recently. 

The alliance also committed to continue the April agreement into December despite some like the Saudis deciding to raise output.

Oil traders responded favorably to the group’s maneuvers.

New York-traded West Texas Intermediate, the key indicator for U.S. crude price, settled the day up 81 cents, or 2%, at $40.97 per barrel. With the gains of the past two days, WTI is already up more than 10% on the week, offsetting a chunk of the combined 13% loss of the past two weeks.

London-traded Brent crude, the global benchmark for oil, was up $1.21, or 2.9%, on the day at $43.43 per barrel by 2:45 PM ET (18:45 GMT). For the week, it rose 8.7%.

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