Saudi Arabia appears to have been largely successful in talking up the price of crude oil by publicly mulling output cuts, but the risk is that the disconnect between paper and physical markets could widen even further.
Global benchmark Brent crude futures were trading around $104.28 a barrel early in Asia on Tuesday, up almost 9% from the close on Aug. 22, prior to the latest Saudi intervention.
Saudi Energy Minister Prince Abdulaziz bin Salman said the world’s largest crude exporter was prepared to cut production to shore up prices. He told Bloomberg News that the drop to around $95 a barrel was based on “unsubstantiated” information on demand destruction and a “a self-perpetuating vicious circle of very thin liquidity and extreme volatility.”
