Inside Oil
Surprise from Saudi Arabia drives up oil prices
The oil price has continued its upward trend. The price for 1 barrel of Brent oil was $8 on Friday morning, January 54. The market has become more positive due to the arrival of several corona vaccines. Many analysts expect a strong economic recovery to take place this year. The deal that the OPEC+ countries reached on production in February also has a price-increasing effect.
Russia previously indicated that it wanted to significantly increase oil production in the country, while Saudi Arabia in particular was recently looking for a stable, high price. It was therefore a surprise that Saudi Arabia announced that it would voluntarily cut oil production by 1 million barrels per day in February and March. Russia and Kazakhstan will then be able to pump up an additional 75.000 barrels in February and another 75.000 barrels in March.
As a result of the above, the oil price has risen sharply to a level of $54 per barrel of Brent oil. The price of diesel has also risen sharply. The price for 1 liter of diesel is now just over €0,96. It remains to be seen what the effect of the production restriction from Saudi Arabia will be in the longer term. The extraction of shale oil is very rewarding at this price level. It is therefore quite possible that production in the United States will be increased in order to fill the gap in OPEC+. The lower dollar rate is an added advantage for many US oil companies.
Jurphaas Lugtenburg
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