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Saudis Try to Fight Declining Oil Prices With Production Cuts

OPEC being squeezed

Silhouette three oil pumps

Thanks a lot to Saudi Arabia for helping to support US oil shale by artificially restricting the supply of oil:

Oil futures moved sharply higher late in Thursday’s trading session, sending the U.S. benchmark up by nearly 3%, after a news report said that Saudi Arabia plans to cut shipments to U.S. refiners to avoid an expansion of U.S. stockpiles.

Oil prices had already been moving up as traders pored over data showing a rise in monthly OPEC output, as well as a recent report of a weekly decline in U.S. crude supplies and production. Price gains intensified after a report from Bloomberg said Saudi Aramco warned U.S. refiners to brace for a steep drop in cargoes next month, citing people briefed on the plans of the state-controlled oil company.

Meanwhile, in its closely watched monthly oil market report, the International Energy Agency said crude output by OPEC rose by 100,000 barrels a day on month to reach 33.03 million barrels a day in November. Saudi Arabia — the de facto head of OPEC — churned out 410,000 barrels a day to a historic high of 11.06 million barrels a day.

OPEC’s output was also bolstered by record production from the United Arab Emirates, whose output climbed by 110,000 barrels a day to hit 3.33 million barrels day, surpassing Iran to become the group’s third-largest producer. Gains from Saudi Arabia and the U.A.E. offset steep declines in Iran, which were the result of U.S. sanctions against the Islamic Republic’s oil industry, the IEA said.

But the agency’s report stands in contrast to OPEC’s own monthly oil market report, which was released Wednesday and showed a slight decline in the cartel’s November output despite ballooning Saudi production.

As I’ve said in previous posts, OPEC is caught in a trap. If they cut production and raise prices, US oil production will surge in response. If OPEC increases production, the price of oil crashes.

We’re starting to see a free market in oil for the first time in ages, and I am happy to see it breaking the back of the old OPEC oil cartel.

 
Doomberg

Written by Doomberg

I am Doomberg, one of the original founding members of Sparta Report, and have been here since the beginning. I am an insatiable news junkie and enjoy reading and writing about the US territories, the Caribbean, video games, smartphones, and of course conservative politics in general.

I also really like pictures of gas stations and claim full responsibility for the silly gas station motif. I'm presently trapped behind enemy lines in a blue state with no hope of escape! The ride never ends.

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