![]() On one side, TotalEnergies and PetroChina have bought 11 million barrels of crude based on the benchmark Dubai price. What is strange though, is the mixed message sent by the big players in the global oil market: in June, they have been betting on opposite sides of the Dubai benchmark, showing how hard it is to assess the impact of the Saudi cuts. Initially, it has been rising against other international benchmarks, as barrels sold by Saudi Arabia and other Gulf producers have displayed a market premium after the production cuts, while shipping rates to Asia climbed. ![]() One closely followed benchmark to assess the impact of Gulf production cuts is the Dubai crude benchmark. Maybe this explains why there are currently mixed bets on the markets. Several months ago, the Kingdom ignored US President Joe Biden’s repeated demands for lower prices. And he intends to give a lesson to those who speculate on lower prices or «try to predict where prices will go».īut even Goldman Sachs is against him, managing oil price expectations downwards: it just made its third downward price revision for the Brent prices in six months, cutting its forecast for December to $86 a barrel, versus $95 previously.īehind these «Markets vs Prince» tensions the actual tension, a geopolitical one, is hidden: the confrontation between Washington and Riyadh. While he still controls the physical oil market, or a big part of it, oil traders control the futures markets. There seems to be some tough arm wrestling going on at the moment between the oil market and Prince Bin Salman, who needs higher-priced barrels in order to finance the Kingdom’s ambitious investments. These factors combined explain why Saudi Arabia is now a bit lonely in its fight for oil price increases. Inside OPEC+, Russia has diverging interests: in the face of Western sanctions, it has had to grant China and India considerable price discounts on its oil. In addition, the fact that Russia has seen its oil shipments soar this year, despite Western sanctions, tilts the risk towards higher supplies while global demand is slowing. ![]() The high Chinese oil inventories are another bearish factor, although they are going down as we speak. Indeed, the fear of slowing Chinese demand is now rising, despite mixed macro signals from Beijing. One key element is that the market seems to believe that these bullish cuts will be largely offset by bigger bearish forces.
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