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Saudi Price Targets Cause Oil Prices to Rise

April 19, 2018 at 15:51 by Matt Jackson

The announcement that the world’s biggest oil exporter, Saudi Arabia, is targeting an oil price of $80 to $100 per barrel, has led to the commodity reaching its highest price since late 2014.

In 2014, OPEC and major oil producers agreed to withhold the supply of oil in order to push prices up. Oil had been oversupplied in the years leading up to this point, causing prices to decline since 2014. Withholding oil meant that there would be less supply, effectively forcing buyers to compete for fewer barrels and pushing the price upwards. Reuters reported, late on Wednesday, that Saudi Arabia wants to see oil prices push up to $80 or even $100; a sign that they would push for a continuation of the agreement to withhold supply. Crude levels have now dropped to nearly-average levels.

Also on Wednesday, the EIA reported that crude stocks had fallen by 1.1 million barrels for the week. The stock of 427.57 million barrels is close to the five-year average of 420 million barrels.

Furthermore, while the tension between the USA and Russia have subsided a little, following sanctions imposed against the country’s businesses, there is still a widespread belief that more sanctions will be coming. This threat of additional action has also seen nickel prices rise significantly in the past few days. There is also the question of whether the USA will reintroduce sanctions placed against Iran. Iran is the third largest OPEC producer of oil, which means that disruption to their supply could have a major influence on price movements.

This combination of supply and geopolitical factors has seen WTI crude reach $68.99 per barrel; an increase of 0.76%. Brent crude, meanwhile, increased 1.13% to reach $74.31 at 16:40 GMT.

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