Oil prices plummet on international markets, awaiting a production increase by OPEC+ and rumors that speak of a Saudi Arabia’s change of strategywhich would be ready to increase production, abandoning the idea of controlling the price of crude oil and pushing it towards a given desired level
Goodbye to the $100 target
According to an indiscretion from the Financial Times, Saudi Arabia would be ready to abandon his “unofficial” price target of $100 to the barrel and would then prepare to increase productionresigning themselves to managing a period of lower prices. A change in strategy that would give a strong signal to the market and could cause a price war enough to cause the price of crude oil to slide much lower than where it is now.
This change in mentality would represent a important change of direction for Saudi Arabia, which from November 2022 pressured other OPEC+ members to cut production repeatedly in an effort to keep prices high near its unofficial target of $100.
But the world’s largest oil exporter and seven other OPEC+ members had already announced the possible reduction in production cuts from the beginning of Octoberwhich they then have postponed for two months due to the drop in oil prices, proposing a production increase for the December 1st next.
Prices plummeting
The prospect of Riyadh abandoning its $100 oil target is looming prices are under pressure on international energy markets, causing the crude oil under $70 per barrel. A value that is already very far from the almost 100 dollars maintained on average during 2022, after the outbreak of the war between Russia and Ukraine. But since then the prices have slipped, thanks to one greater diversification of the offerpreviously too polarized between the Middle Eastern bloc and Russia. Alone in the last monththe prices of Brent and WTI they slipped by about 12%.
But where can the crude oil go?
The market’s reaction yesterday, to the news of Saudi Arabia’s change in strategy, was undoubtedly excessive, but not out of place. According to experts, in fact, the oil could even reach the $40 areaif Riyadh’s decision to increase production and abandon the 100 dollar target will start a price war and one supply rush during 2025.
The oil market
The oil market, after having highlighted a substantial deficit during the pandemicnow discounts the effects of economic slowdown world and especially China and therefore shows a surplus supply compared to a stagnating demand.
According to the latest September report ofInternational Energy Agencyglobal oil demand growth continues to decelerate, with a estimated increase alone 800 thousand barrels per day in the first half of 2024, the lowest since 2020. The main driver of this decline is the Chinawhere consumption contracted for the fourth consecutive month in July, by 280 thousand barrels. One is expected at the end of the year global demand of 103 million of barrels per day (mbd). The global offer instead it is estimated to increase by 80 thousand barrels, reaching i 103.5 million bd in August.
