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The Saudis Are Hinting At Another U-Turn In Oil Markets

A month after President Donald Trump announced that the United States was withdrawing from the Iran nuclear deal and re-imposing…

A month after President Donald Trump announced that the United States was withdrawing from the Iran nuclear deal and re-imposing sanctions on Tehran’s oil, Iran’s archrival and OPEC’s de facto leader Saudi Arabia received its Arab Gulf fellow cartel members and OPEC + deal partner Russia on board to start pumping more oil to offset the expected loss of Iranian supply.

Just five months later, Saudi Arabia and OPEC are hinting that a fresh oil production cut, as rising production and signs of waning demand growth point two oversupply next year.

The oil market and analysts-who were questioning just two months ago the Saudi and Russian ability to offset expected steep Iranian losses-are now thinking that OPEC and its allies reacted too soon to come to the rescue of global oil supply.

Analysts say that President Trump, intentionally or not, “duped” the Saudis into overproducing to compensate for what was expected to surely be more than 1

mi lion bpd and even close to 2 million bpd loss from Iran.

The Saudis and Russia actually said that they were compensating for Iran-their goal, as always, was to ensure market stability, OPEC’s favorite buzzword.

Throughout the summer and early fall, the United States was Hinting dat deze tijd om sancties zal worden meer ernstig dan tijdens de Obama-administratie en dat de doelstelling was om Iraanse olieuitvoer naar ‘nul’ te hebben.

In realiteit, weinig gedacht dat Iran’s export zou worden nul aan het begin van november , maar de oliemarkt en analysts begonnen te vrezen dat de Iraanse verlies zou veel meer dan verwacht eerder. As a result, the market welcomed the rising production from Saudi Arabia and Russia, and even questioned whether that would be enough.

Oil prices jumped to four-year highs, with Brent Crude hit $ 86 in early October, a month before the U.S. Sanctions on Iran snapped back.

But those higher oil prices began to weigh on the crude import bill of many emerging markets, especially the world’s third largest oil importer India, aggravated by sliding local currencies against the U.S. dollar.

Add to this the escalating U.S.-China trade war, which began to weigh on global economic and oil demand growth prospects, and the fear of a supply crunch flipped into fear of waning demand. In just two months, the key question among market participants and analysts also flipped from ‘they are pumping enough’ to ‘are not overproducing’.

Then came the start of the U.S. Sanctions on Iran, and with it, waivers to eight Iranian oil customers-including the largest buyers China and India-due to the specific countries’ circumstances and to ensure a well-supplied oil market, as U.S. Secretary of State Mike Pompeo said .

Related: Natural Gas Markets Remain UltraTight

The Sanctions on Iran and the U.S. waivers came on the eve of the U.S. midterm elections. President Trump saw U.S. gasoline prices drop to a six-month low the week before the elections. As analysts say, few things really terrify an American president more than surging fuel prices.

According to analysts who spoke to CNBC, the Saudis were tricked into pumping more in anticipation of severe Iranian losses and a determined U.S. Iran’s exports are down, around 1 million bpd from May, but some 1.2 million bpd-1.5 million bpd are probably still out there flowing to Tehran’s customers-compared to estimates that 1.5

Related articles: Oil Prices Rise As Saudis Cut Exports

“They’ve really done a good job of decreasing that oil price, but it has been at the expense of some of those relations there, because surely the saudis have Got to be pretty unhappy with the way things have played out here, “Smith said.

The Saudis are now hinting of another U-turn-a new cut next year. Saudi energy minister Khalid al-Falih reiterated that “Russia is reportedly reluctant to join another collective reduction in supply.”

Præsident Trump antyder ikke noget overhovedet – han sagde prices should be even lower in his latest tweet aimed at OPEC this week- “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply! “

The next full OPEC meeting at which production policy decisions could be taken takes place in the first week of December. We are in for an interesting two and a half weeks of rumors, leaks, hints, and comments from Saudi Arabia and Russia, and probably from President Trump.

By Tsvetana Paraskova for Oilprice.com

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