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Will Saudi Arabia Lead the Bull Market for Crude Oil Prices?


Nov. 20 2020, Updated 2:12 p.m. ET

US crude oil prices 

US crude oil futures (DWT) (USO) contracts for December delivery rose 3.1% to $57.35 per barrel on November 6, 2017. Brent oil futures contracts rose 3.5% to $64.27 per barrel on November 6, 2017. The prices are at a 30-month high. The January 2018 Brent oil futures (BNO) contracts’ premium traded to January 2018 US crude oil (DBO) (USL) futures was at $6.70 per barrel—near a 27-month high.

Saudi Arabia’s security officers arrested 11 princes, ministers, and prominent businessmen as part of the anti-corruption probe on November 5, 2017. The arrests could cause instability in Saudi Arabia, which is one of the largest oil producers in the world. As a result, oil prices rose on November 6, 2017. The weak US dollar (UUP) also supported oil prices on the same day.

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Saudi Arabia and crude oil prices 

Saudi Aramco is Saudi Arabia’s state-owned oil firm. It produces ~10% of the global crude oil supplies in the world. Top officials from Saudi Aramco were also arrested as part of the anti-corruption probe. All of these actions suggest that Crown Prince Mohammed bin Salman is trying to reform Saudi Arabia’s economy. Some traders think that these actions won’t bring many changes to the oil policies.

Seaport Global Securities predicts that crude oil prices could hit $70 per barrel due to political uncertainty in Saudi Arabia. Crown Prince Mohammed bin Salman is considered to be Saudi Arabia’s next king. To spur the economy, Saudi Arabia is cutting expenses and planning to sell the stake in oil major Saudi Aramco.

Saudi Arabia needs higher oil prices for a successful IPO (initial public offering) of oil major Saudi Aramco. A successful IPO means narrowing the country’s budget deficits. Saudi Arabia is the major contributor to ongoing production cuts. Saudi Arabia is trying to push oil prices higher. Oil (USO) (BNO) (OIL) prices have risen more than 30% since the lows in June 2017. The International Monetary Fund estimates that Saudi Arabia wants crude oil prices at $70 per barrel to meet its 2018 budgets expenses. However, some experts think that crude oil (DBO) (UWT) prices at $100 per barrel would be ideal to meet its financial obligations and future goals.

Series overview 

In this series, we’ll discuss the latest developments regarding production cuts, Iraq’s crude oil production, the US dollar, Cushing oil inventories, and the US oil rig count.


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