Oil clings to US $90 after Saudi warnings touch off market swings
West Texas Intermediate pared more than US $4 of losses intraday to settle above $90 a barrel, still finishing cents below the previous session
Oil clung to $90 at the conclusion of a volatile session after Saudi Oil Minister Prince Abdulaziz bin Salman warned the disconnect between the futures market and supply fundamentals may force OPEC and its allies to act.
West Texas Intermediate pared more than US $4 of losses intraday to settle above $90 a barrel, still finishing cents below the previous session.
The Saudi oil chief warned that “extreme” volatility and lack of liquidity in the futures market are moving prices in ways that don’t conform to fundamental supply-and-demand factors.
The divergence may prompt the OPEC+ alliance to act, Bloomberg News reported. So far this month, prices have swung within a range of about US $13.
Prince Abdulaziz represents the largest oil producer in OPEC+ and is arguably the most important player in the 23-nation alliance. He said futures prices don’t reflect the underlying fundamentals of supply and demand, which may require the group to tighten production when it meets next month to consider output targets.
“The Saudis just reminded oil markets that they still run the show,” said Ed Moya, senior market analyst at Oanda. “OPEC+ is not happy with how oil market fundamentals are nowhere being reflected with current prices. It seems energy traders should prepare for enhanced volatility going forward and that the Saudis may look to do whatever it takes to keep prices supported here.”
Prices fell earlier in the session after US President Joe Biden spoke with leaders from France, Germany and the UK about reviving a nuclear deal with Iran, a step that probably would allow more crude shipments by the OPEC nation.
After surging in the first five months of the year, crude’s rally has been thrown into reverse, with losses deepening in the summer trading months.
The selloff, which has been intensified by below-average trading volumes, may alleviate some of the inflationary pressures coursing through the global economy that have spurred central banks, including the US Federal Reserve, to hike rates.
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