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Oil Surges on Saudi Arabia Price Target, US Stockpiles Fall

Oil prices surged to their highest level in over 3 years on Thursday as Saudi Arabia price target set and US inventories fell.

Brent crude futures was up $74.73 a barrel, the highest since November 27, 2014. It was the day OPEC decided to squeeze as much as it could to defend market share. It sent the price to a low of $27 just over a year later.

US West Texas Intermediate (WTI) crude futures rose 98 cents to $69.45. Earlier, WTI had hit $69.56, its highest since November 28.

The Organization of the Petroleum Exporting Countries (OPEC) and other major producers including Russia began to withhold output in 2017. It was a move to rein in oversupply that had depressed prices since 2014.

a view of a city in saudi arabia with tall skycrapers on the front
Oil prices rose after Saudi Arabia is comfortable with its price target.

OPEC and its partners will meet in Jeddah, Saudi Arabia, on April 20. And OPEC will meet on June 22 to review its oil production policy.

The surge came after Reuters reported that Saudi Arabia would be comfortable with price target. It was in a range of $80 to $100 over the near term.

“Saudi Arabia can push the price to $100 if it keeps supply sufficiently tight,” Carsten Fritsch, analyst at Commerzbank, told MarketWatch. “But it won’t be without paying a price in the long-term, i.e. causing a new wave of shale oil and oil from other sources.”

It plots the listing of its state-owned producer Saudi Aramco in early 2019. It’s also unlikely to ask for any changes in the current pact between OPEC members, including non-cartel allies. This includes Russia as it is taking 1.8 million barrels of crude from the market each day.

“The Saudis and their colleagues in OPEC need higher oil for their fiscal positions and the Kingdom is on a bold and costly reform program,” said Greg McKenna, chief market strategist at AxiTrader. “So they might continue to squeeze the lemon while they have the chance.”

From the Saudi Price Target, the drop of US Stockpiles also supported

Prices were also supported as US oil stockpiles dropped the board last week. Petrol and distillate went down more than expected on stronger demand, according to data from the US Energy Information Administration.

Inventories dropped by 1.1 million barrels as a result of a decline of 1.3 million barrels per day in net crude imports.

“This may be one of the most bullish reports in some time, with the across-the-board declines in inventories,” said John Kilduff, partner at Again Capital Management.

“Beyond the headlines, petrol demand was very strong, virtually summer-like, and crude oil exports are climbed back toward 2 million bpd at 1.75 million.”



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