Oil’s Drop Set to Test Gulf Producers

Saudi Arabia

Oil’s Drop Set to Test Gulf Producers

Oil’s 25% slump in the past three months has rattled OPEC+, and led the Saudi Arabian-led group to warn any investors shorting the commodity that it’s willing to cut production.

Crude prices surged above $120 a barrel after Russia’s invasion of Ukraine in February, boosting economies and stock markets across the Persian Gulf. Since then, a strengthening dollar and traders’ concerns about slowing global growth have led to a drop to around $90.

The Organization of Petroleum Exporting Countries and its partners, a 23-nation alliance, last week decided to lower output by 100,000 barrels a day in October. While the amount is minuscule -- around 0.1% of world supply -- Saudi Energy Minister Prince Abdulaziz bin Salman signaled bigger reductions could come.

“We will use all of the tools in our kit,” he said in an interview. “The simple tweak shows that we will be attentive, preemptive and pro-active.”

The Saudis and other OPEC+ members including Iraq, Kuwait and Algeria have said futures prices are “disconnected” from reality. The oil market has hardly any spare production capacity and demand in China will recover strongly once coronavirus lockdowns are eased, they argue.

Many Wall Street analysts agree. Still, there’s enough bearishness among traders that OPEC+ may

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