Saudi Arabia, Russia demand $100 Oil
With their combined +11 million bpd quotas, OPEC+ heavyweights Saudi Arabia and Russia view $100 oil as a fair price that benefits everyone, according to unnamed Reuters sources familiar with both the Russian and Saudi Arabian governments’ viewpoints.
Since Saudi Arabia and Russia together account for more than half of the entire OPEC+ quota and are commonly seen as the group’s leaders, a $100 preference would result in a vigorous defence of the targeted floor price.
Long ago, OPEC rejected the claim that it sets its sights on particular oil prices; instead, OPEC asserts that it seeks to maintain the equilibrium of the oil market. Oil prices, nevertheless, continue to be important in preserving that equilibrium.
The OPEC+ officials, who wished to maintain their anonymity, claimed that OPEC+ has made it clear that it favours a price of between $90 or $100 per Brent barrel, which is higher than some in the industry had previously believed, according to Reuters.
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When oil prices were near $100 but decreasing at the OPEC+ meeting in August, OPEC+ took action—albeit a small action—to defend this price by reducing its output quota by 100,000 bpd. Although it wasn’t enough to keep Brent prices around $100, it may have contributed to the fact that they have remained over $90 for the most part while fighting recessionary fears that aim to scare the market into thinking that crude oil consumption may decline during difficult economic times.
One of Reuters’ Saudi sources explained that the reason OPEC+ appears to have increased its intended floor price is because the cost of materials has increased along with inflation and the necessity for petroleum producers to earn more money to offset rising production expenses.
One of the unidentified insiders added, “An oil price at $120-130 is risky and Saudi will avoid it, but at $100 it won’t have a significant impact on the world economy – Saudi would be okay with that price.”
According to two Reuters sources familiar with Russian thinking, Russia, which has had to supply its oil at discounts for months, wants to see oil prices at least $100 per barrel.
It might only be a matter of time until OPEC+ decides to actively defend this price level by reducing production, especially with Saudi Arabia and Russia supporting the $100 oil horse.