It’s been an up and down day for oil markets, with Brent crude trading up more than 1 percent today after spiking, crashing, and then edging up once again. What has traders so busy, then? As the Wall Street Journal reports, the Saudis are behind the volatility after the country’s cabinet said it would be willing to cooperate with non-OPEC producers to, well, stabilize prices (how’s that for irony?):
Saudi Arabia’s official press agency Monday quoted the cabinet in a statement as saying it was ready to cooperate with countries within and outside the Organization of the Petroleum Exporting Countries to maintain the stability of the market.
Some investors interpreted this as a sign that Saudi Arabia, the most influential member of OPEC, could push the oil cartel to curb its output and increase prices at its coming meeting Dec. 4. OPEC has produced above its target of 30 million barrels a day for months.
This isn’t a new position for Riyadh, however. As one analyst told Bloomberg, “[the Saudis] have always said they would cooperate if non-OPEC joins.” And that makes obvious sense: Saudi Arabia would be more than happy to consolidate control of the global market by colluding with non-OPEC producers to keep prices high. The problem is, unlike OPEC’s members, those producers include private companies unwilling to artificially set prices by cutting production.
From the start of this latest price plunge, the Saudi strategy has centered on valuing a share of an increasingly crowded global oil market more than sustained higher prices. But while prices ticked upwards today perhaps on the belief that the Saudis are mulling a production cut, doing so “would surrender all their efforts, or any success they had achieved so far in the last 12 months and any pain would have been for nothing”, Commerzbank strategist Carsten Fritsch told Reuters.
We’re seeing little sign of the global supply waning enough to offset the current glut, and similarly little enough movement on the demand side to soak up this copious crude. For now, low prices seem here to stay, despite today’s volatility.