Saudi Arabia: Rally in oil prices continues in recent weeks
May 7, 2018
Oil prices remain in a sweet spot due to a combination of restricted oil supply, healthy global demand and mounting geopolitical risks. As a result, OPEC oil prices crept above the USD 70 per barrel mark in mid-April and hit their highest level in nearly three and a half years on 24 April. In the following days, oil prices receded slightly. On 3 May, the OPEC oil basket traded at USD 70.7 per barrel, an 8.7% increase from the same month in April. The price was up 9.6% from the start of the year and was 46.2% higher than on the same day in 2017.
Despite fears of a full-blown trade war between China and the United States, economic data for Q1 shows that the global economy continued to expand at a robust pace on the back of largely accommodative monetary policies, fiscal support and tight job markets. Strong global growth is boosting demand for the black gold. Moreover, the countries participating in the oil cap deal posted the highest conformity level ever in March (149%), effectively putting a cap on global oil supply. According to the U.S. Energy Information Administration, OECD (Organization for Economic Cooperation and Development) crude oil inventories reached close to their lowest level in three years in March 2018. On top of strong fundamentals, oil prices are building on rising geopolitical tensions, particularly in the Middle East; the United States could reinstate economic sanctions against Iran as of 12 May.
Combined oil output among OPEC members dropped from 32.2 million barrels per day (mbpd) in February to 32.0 mbpd in March, according to the cartel’s latest Monthly Oil Report. The decline came on the back of lower output in Algeria, Angola, Libya and Venezuela. In contrast, crude output in Nigeria, Qatar and the UAE rose significantly month-on-month. Output in Saudi Arabia fell from 9.98 mbpd in February to 9.93 mbpd in March.