There are certain benefits when the president of the US is BFFs with the ruling Saudi regime, especially when the price of oil rises so high it threatens to not only undo the US president's tax reform, but to slowdown the overall economy even as said president is injecting a $1 trillion fiscal stimulus in it. We saw that in practice moments ago when Saudi energy minister Khalid Al-Falih said OPEC and Russia are prepared to adjust policy in June, and that it is likely that there will be a gradual oil supply boost in the second half.
- FALIH: LIKELY TO BE A GRADUAL OIL SUPPLY BOOST IN SECOND HALF
- FALIH: `WE WILL DO WHAT IS NECESSARY IN JUNE' OPEC MEETING
The stated reason: "The anxiety of consumers is now a concern to us", translated: between the IEA's forecast of demand destruction the higher the price of oil rises, and Trump's periodic reminders to pump more as US gas prices are getting too high, Saudi Arabia had no choice but to take the first step toward undoing the Vienna oil supply cut agreement.
- AL FALIH: DEMAND GROWTH WILL LIKELY MODERATE AT CURRENT PRICES
- DAIMLER ERASES GAINS ON XETRA AFTER REPORTS OF POSSIBLE RECALL
As Bloomberg adds, "the proposal would end a period where the group made significantly deeper output reductions than specified in their original agreement, while also preserving the political and economic alliance between Moscow and Riyadh that has reshaped the global oil market and the balance of power in the Middle East."
The group is still debating whether resuming normal compliance with the accord would mean nations individually return to 100 percent compliance with their targets, or whether the group as a whole would aim for that level, the people said, asking not to be identified because the talks are private.
The Saudi hedged, saying “we will ensure that the market remains in its trajectory towards rebalancing, but at the same time we will not over-correct,” Al-Falih said. While scaling back the supply caps is “on the table,” no decision has been made.
And while Al-Falih's Russian peer, Energy Minister Novak said it is too early to talk about the possible scale of easing production cuts, he added that easing production cuts would make sense in Q3 2018, confirming that it is now just months before OPEC starting pumping extra oil into the system to offset the decline from both Venezuela and, soon, Iran.
As Bloomberg adds, the oil producers ex-shale are debating whether resuming normal compliance with the accord would mean nations individually return to 100 percent compliance with their targets, or whether the group as a whole would aim for that level, the people said, asking not to be identified because the talks are private.
The first case would return only a limited amount of supply to oil markets, mainly from Saudi Arabia. The second could allow the group to boost output more significantly, as other members offset losses from the collapse in Venezuela’s oil industry. Oil producers are debating an increase ranging from 300,000 barrels a day at the low end, backed by Gulf producers including Saudi Arabia, and a larger increase of about 800,000 barrels a day favored by Russia, one person said.
As a result, Oil has tumbled, sliding below $70/barrel, and down to $69.25 last, the lowest price since June 8 when Trump announced the US withdrawal from the Iran nuclear deal.