Saudi Arabia is talking about a possible intervention in the oil market

08.08.2019 11:17|Conotoxia Ltd Analyst Team

From mid-July to Wednesday, August 7, the price of a barrel of WTI oil fell by more than 17 percent from around $ 61 to $ 50.50. Only on Wednesday, the drop was almost 5 percent and as a consequence the price of the WTI barrel was at its lowest since the beginning of 2019, which worried the producers of oil and the OPEC.

The price of oil now seems to depend on how the trade conflict between the United States and China develops. Its escalation may increase concerns about a deeper economic slowdown or recession. In this case, when the economy slows down, the demand for oil decreases. In turn, lower demand may affect the price, which according to the basic principles of economics should be lower in such a case. As a result, oil prices have fallen to January levels this week.

The price decline is unfavorable for producers and the OPEC cartel, which, together with its allies OPEC +, cuts production in order to keep prices at a relatively higher level. Hence, on Wednesday, Saudi Arabia was to contact other oil producers to take steps that could prevent a further decline in oil prices.

Saudi Arabia, which is the largest oil producer in the world and has cut production more than what was agreed between the OPEC countries, will not tolerate a further decline in oil prices. All options are possible, including market intervention - news agencies said. This news seems to lead to a slight rebound in oil prices on Thursday, but at least stopped the fall in prices.

The next meeting of OPEC and OPEC + will start on 9 September in Abu Dhabi. There are many indications that talks between Saudi Arabia and Russia leaders will be key, and investors may expect oil producers to adapt their policies to recent market developments.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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