Crude oil prices have been on the backfoot for six weeks, pressured by fresh lockdowns in Europe, a new coronavirus variant that is making its way across the globe, and a move by the United States to release 50 million barrels from their emergency stockpiles.
But oil prices snapped out of its losing streak this week on bullish OPEC+ moves that signaled the group wasn’t so worried after all about new lockdowns and new variants – and on Saudi Arabia’s bold move that raised the official selling price of its flagship Arab Light crude oil grade to a nearly two-year high.
For Saudi Arabia, the price hike is the highest price it’s set for Arab Light since before the pandemic. And this at a time when oil prices have careened off a cliff in recent weeks, could seem oddly timed. But Saudi Arabia hinted at the price hikes in November and the nation’s price moves are watched closely by the industry to determine which way the market could be leaning.
Price hikes suggest a period of strong demand is on the horizon while lowering prices would seem to indicate a softer demand outlook. And even though November’s oil prices sank roughly 20%, Aramco’s CEO has maintained his optimism for oil demand although OPEC+ has itself suggested that there could be a surplus in Q1 and Q2 next year.
Volatility in the oil market remains on high alert, with OPEC+ agreeing to ramp up production for January, but leaving its options open to scale back its production plans if slackening demand warrants it.
