Rising output will keep a lid on the oil price

Oil exporters’ cartel Opec gave further encouragement to the bulls this month after agreeing to new production curbs.

Oil has hit a three-month high above $65 a barrel following Trump's China trade deal. That is a level not seen since September's drone attack on Saudi Arabia briefly knocked out some 5% of global supply.

Brent crude is up about 21% for the year, but still below April's 2019 high of $74.5. Oil bulls were given further cheer when Saudi Aramco's stock briefly soared above the symbolic valuation level of $2trn on the Saudi Tadawul index, notes Avi Salzman for Barron's.

Yet Bernstein analysts reckon that at current prices the company is worth closer to $1.36trn. Political influence makes it "hard to argue that Aramco's current price is a true market price'".

Oil exporters' cartel Opec gave further encouragement to the bulls this month after agreeing to new production curbs, says Sarah Toy in The Wall Street Journal. The oil cartel and allies will cut output by 500,000 barrels a day until April, adding to an already existing 1.2 million barrels per day cutback.

Yet the oil rally stalled at the start of this week because of scepticism over whether the deal will truly reduce global supplies next year. Nigeria and Iraq are already struggling to honour existing commitments.

The International Energy Agency expects global oil inventories to rise by 700,000 barrels per day in the first quarter of 2020 due to weak global demand and rising output in non-Opec states. That could keep a lid on oil.

Recommended

Why petrol prices are higher than in 2008, despite lower oil prices now
Inflation

Why petrol prices are higher than in 2008, despite lower oil prices now

The price of petrol is at an all-time high. Yet despite oil prices being higher in 2008, petrol was cheaper back then. Saloni Sardana explains why.
30 Jun 2022
Oil shortage starts to curb demand
Oil

Oil shortage starts to curb demand

The price of Brent crude oil is up by 475% since its March 2020 low. And when oil prices rise, people start to reduce consumption, leading to increas…
30 Jun 2022
Get ready for the coming oil glut
Oil

Get ready for the coming oil glut

Investors are assuming that energy prices will stay high. History suggests the opposite, says Max King
20 Jun 2022
As oil prices surge, should you buy BP shares?
Energy stocks

As oil prices surge, should you buy BP shares?

The imbalance between supply and demand has sent the oil price surging, bringing bumper profits to oil giant BP. Rupert Hargreaves looks at the numbe…
14 Jun 2022

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Is inflation about to drop as recession takes hold?
UK Economy

Is inflation about to drop as recession takes hold?

Central banks are raising interest rates in an attempt to curb soaring inflation. But will that push the economy into recession? John Stepek looks at …
5 Jul 2022