Skip to main content

Ask Saudi Arabia about its preferred oil price and the kingdom will say it has no target.

But a look at the pronouncements on the oil market by the world’s top oil exporter this year points to an oil price aspiration of around $70 per barrel.

OPEC’s de facto leader probably would not mind oil prices rising to $75 per barrel and beyond.

Story continues below advertisement

But it has a problem. As soon as prices surge, U.S. President Donald Trump pops up, often on Twitter, to urge Saudi Arabia to lower prices.

OPEC has long understood the impact a few words said to reporters in a hotel lobby or over the phone can have on the price of oil, often called “jawboning” by analysts.

As a result, prices have been stuck between $60-$75 per barrel this year, despite financial market volatility and big oil supply outages, mainly driven by U.S. sanctions on Iran and Venezuela.

OPEC accounts for about a third of world supply and comments from unidentified officials with insight into production levels not previously disclosed or forward guidance on OPEC policy can move prices quite significantly.

The Organization of the Petroleum Exporting Countries and Saudi Arabia do not have an official price target, but sources say Riyadh wants oil to be at least $70.

Verbal interventions by OPEC and Saudi sources this year appear to support this.

Only in April with Brent near $75, according to comments reported by Reuters, has an OPEC source with insight into Saudi production made a comment likely to cool prices. At least five other comments with oil between $70 and $57 have been price supportive.

Story continues below advertisement

“Saudi Arabia is committed to do whatever it takes to keep the market balanced next year,” a Saudi official, who asked not to be identified by name, said on Aug. 8, a day after Brent had fallen below $56, its lowest since January.

The comment helped to drive oil prices 2 per cent higher on that day.

OPEC has been mostly trimming production since the start of 2017 and traders say they expect Saudi Arabia to reduce output further amid slowing global oil demand.

“The oil cartel is well-trained in the practice of lifting sentiment and stabilizing energy markets in times of trouble,” said Stephen Brennock of oil broker PVM of the Saudi comments.

“This time was no different and leading from the front, as ever, was the group’s de-facto leader Saudi Arabia,” Brennock said, referring to the Aug. 8 comments.

Meanwhile, Trump has been urging U.S. ally Saudi Arabia to lower prices and make up for a shortfall in exports from Iran. His comments on OPEC have sometimes had an even bigger impact on prices than OPEC’s own.

Story continues below advertisement

“Gasoline prices are coming down. I called up OPEC, I said you’ve got to bring them down,” Trump told reporters on April 26, a day after Brent reached $75.60, its highest this year.

Oil fell 3 per cent on that day as Trump’s comments gave impetus to a sell-off.

With prices falling below $70 and $60, the frequency of OPEC source comments likely to support prices has increased. With prices well below $75, Trump has eased back in his public pressure on OPEC.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies