Is OPEC Locked Into Supply Cuts With Oil Below $75

The New Diplomat
Writer

Ad

Cuts to US oil jobs and spending threaten output growth

The U.S. oil industry has laid off thousands of workers and cut billions in spending due to lower oil prices and the biggest consolidation in a generation, in what could mark the end of the rapid output growth that made the U.S. the world's top producer. The Organization of the Petroleum Exporting Countries and its…

‘Godfather of AI’ says the technology will create massive unemployment and send profits soaring — ‘that is the capitalist system’

Pioneering computer scientist Geoffrey Hinton, whose work has earned him a Nobel Prize and the moniker “godfather of AI,” said artificial intelligence will spark a surge in unemployment and profits. In a wide-ranging interview with the Financial Times, the former Google scientist cleared the air about why he left the tech giant, raised alarms on potential threats from AI,…

News Corp Announces Resolution of Murdoch Family Trust Matter

News Corporation ("News Corp" or the "Company") (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV) today announced that the trustee and beneficiaries of the Murdoch Family Trust ("MFT") informed the Company that they have reached a mutual resolution of the legal proceedings in Nevada related to the MFT, resulting in the termination of all litigation. New trusts…

Ad

By Julianne Geiger 

As oil prices hover underneath the $75 for a Brent barrel, OPEC has likely found itself stuck with the extra supply cuts it took on—mainly Saudi Arabia—a hedge fund manager told Bloomberg on Friday.

“It would be too damaging to prices to remove it at this time, given the fragility of sentiment,” hedge fund manager of Black Gold Investors LLC said.

Earlier this month, Saudi Arabia voluntarily agreed to downsize its production targets by another 1 million barrels per day for the month of July—although it could be extended. Oil prices reacted by jumping up, but the effects were not long-lasting. Today, crude oil prices are lower than they were prior to the announced cut, putting OPEC in a tricky position.

In the runup to the OPEC meeting, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman warned traders once again against taking a speculative bet against oil. He made similar threats back in 2020. “I’m going to make sure whoever gambles on this market will be ouching like hell,” he said at the time.

Indeed, OPEC’s cuts they announced back in April hurt short sellers when prices rallied. This time, however, the warning ahead of time likely muted the response to Saudi Arabia’s generous production cut.

OPEC—most importantly Saudi Arabia—is working against disappointing economic data out of China.

Brent prices are just a hair under $75 per barrel today, but recent estimations from the International Monetary Fund suggest that Saudi Arabia’s fiscal breakeven for crude oil is more than $80 per barrel.

Saudi Arabia’s extra cuts go into effect in July, and prices could tick up as supply tightens. After all, the IEA has predicted that crude oil supply will exceed demand by 2 million bpd in the second half of this year.

NB: Julianne Geiger wrote this article for Oilprice.com

Ad

Unlocking Opportunities in the Gulf of Guinea during UNGA80
X whatsapp