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Extension of oil production cuts may mean higher prices in 2018

Posted on by Todd Bennington

OPEC

Todd Bennington | Kingdom Exploration Media
http://kingdomexploration.com

OPEC and non-OPEC producers agreed last Thursday to extend oil production cuts that were set to expire in March until the end of next year. A meeting to review the agreement with an eye toward making any necessary adjustments has been scheduled for June.

Citing also the uncertainty surrounding social and political changes occurring in Saudi Arabia, at least one analyst predicts this could mean oil could reach $80 per barrel next year. [1]

Other factors potentially affecting oil prices include how the political situations in places like Libya, Nigeria, Venezuela, and Iraqi Kurdistan stabilize or deteriorate – as well as how U.S. producers react to price increases.

“If producers in the U.S. increase their rig count over the next few months due to higher prices then I expect another price collapse by the end of 2018,” an executive with one of the Permian Basin’s largest producers is quoted by Reuters as saying. “I hope that all U.S. shale companies will maintain their current rig counts and use all excess cash flow to increase dividends back to their shareholders.”[2]

[1] https://www.cnbc.com/2017/11/27/brent-crude-oil-may-hit-80-in-the-next-year-says-jim-oneill.html

[2] https://www.reuters.com/article/us-opec-meeting/opec-russia-agree-oil-cut-extension-to-end-of-2018-idUSKBN1DU0WW?il=0

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Saudi leader’s recklessness could drive up oil prices

Posted on by Todd Bennington

Skyline of Saudi capital Riyadh

Todd Bennington | Kingdom Exploration Media

Dr. Cyril Widdershoven writes in a recent article at Oilprice.com that the liberalizing reforms and anti-corruption push of Saudi Crown Prince Mohammed bin Salman (MBS), as well as potential Arab conflict with Iran and its proxies such as Hezbollah, may very well cause a dramatic and sustained increase in oil prices. That is certainly true, but at what cost?

Widdershoven is dismissive of investors around the world who have expressed fears that MBS has “overplayed his hand, causing instability in the country and the region” through his arrest of various prominent Saudi royals and businessmen. Widdershoven goes on to laud MBS for “being unafraid to make dramatic changes to outdated social structures within the kingdom.”

It seems more likely that investors’ fears are well-founded. MBS has made far more enemies than friends among the Saudi establishment through his brash moves. Neither is it clear that Saudi society is destined to keep moving along a trajectory of Western-style reform without significant pushback.

MBS also represents a serious potential liability for the United States. With U.S. support first given by the Obama administration, the Saudis are currently presiding over a blockade of the impoverished country of Yemen in an effort to punish the Houthi rebels who have taken control of much of that country. But, of course, it’s children, the elderly, and the infirm who are bearing the brunt of the imposed shortage of food and medical supplies, and the situation is developing into a politically embarrassing humanitarian disaster.

Likewise, with less than half the population of Iran, the Saudis would likely need U.S. backing to prevail in any prolonged military engagement. After Afghanistan, Iraq, and Syria, it’s questionable whether at this juncture that’s something that the U.S. would be willing to commit itself to.

Widdershoven’s article can be found at: https://oilprice.com/Geopolitics/International/Saudi-Corruption-Crackdown-Could-Permanently-Boost-Oil-Prices.html

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