Saudi Arabia keeps control of oil market despite production increase
International Business News Writer
Prince Abdulaziz bin Salman, Saudi Arabia’s oil minister, has urged fellow producers to tighten the amount of oil released into the market. He fears that additional oil flowing into the market could cause prices to drop. Especially during the pandemic, oil prices have declined due to an increase in the number of people staying home. The pandemic has resulted in most of the workforce staying home, leading to fewer people on the roads. While Prince Abdulaziz is in favor of restricting oil output, other producers such as Russia want the flow of oil into the market to open.
In late March, Prince Abdulaziz seemed to reach a compromise with the rest of the members of the Organization of the Petroleum Exporting Countries and allies (OPEC Plus). He and other members of this group have agreed to gradually allow the rate of oil into the market to increase over the course of three months. Allowing the time span of three months prevents the prices and production from rising dramatically. This will allow the “prince to maintain control over the course of the next few months so there is added comfort of the ability to back out”, says Helima Croft, strategist at RBC Capital Markets. The plan is to increase production by 350,000 barrels a day in May and June, then move up to 441,000 barrels in July. This is in addition to the 1 million barrels Saudi’s have been restricting for the past few months, which will put the total at around 2.21 million barrels a day by July. Traders in the oil market have acknowledged their approval of the deal, such as Bent Crude moving up the price to 3.4%, which put the price of a barrel at $64.86.
Analysts of this deal believe that the prince only agreed to this out of interest to keep his influence over OPEC in the long term. After all, Prince Abdulaziz is arguably the most powerful individual in the oil business. As the economies are beginning to recover, the oil industry finds itself struggling to find a balance between the most suitable price to match the demand. An increase in oil prices could possibly put oil producers, like the Saudi prince at a disadvantage if there is not a large number of consumers. Although rising prices are not very exciting, it will still put the economy in a state of renewal of pre-pandemic times.
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