WTI continues its rise. Should we expect a surrender of S.Arabia and Russia from a further oil cuts?

Oil continues to reach record levels against the backdrop of positivism stemming from low oil reserves in the United States and the forthcoming OPEC meeting to be held on 30 November in Vienna. The expectations of all investors are the organization headed by Saudi Arabia and Iran to extend the agreement from March to December 2018. Earlier this week, it became clear that the energy ministers of six OPEC countries and Russian Energy Minister Alexander Novak held informal talks in Bolivia a week before the group meeting in Vienna.

So far, everything sounds very positive for black gold, but the emerging conflict between Saudi Arabia and Iran can make the two largest exporters in the world think about whether to cut exports or prefer to export more and make more profits , through which to fund military action.

Seen from the Saudi Arabian side, it does not seem very logical for the country to reach its budget, given the reforms the new Crown Prince has decided to implement. Mohammed bin Salman is already in command of the army and the police, the national guards and the secret services – in other words, the whole security apparatus, not least the support of the younger population who wants more freedom and reforms in the country.

Given the circumstances, mainly in Saudi Arabia, and Russia’s unwillingness to proceed with further cuts in March 2018, surprises are not ruled out at a meeting in Vienna on November 30. Currently, investors are pledging new redundancies since March, ignoring the foundation, and much of the “new cuts” have already been accumulated in the price. If at the meeting in Vienna we see a withdrawal of Saudi Arabia and Russia together from a subsequent cut, the price of oil could be seriously crashed, and in that case prices of $ 50 and lower for WTI are not excluded.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

 Varchev Traders

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