Saudi Arabia Has a $2 Trillion Reason to Play Ball with OPEC This Fall

Saudi Arabia just made it much more likely that OPEC and other oil producers will take action if crude prices weaken.

Word that the cartel will meet on the sidelines of an energy conference in Algeria in late September had already stirred up the oil market this week, but confirmation Thursday from Saudi Energy Minister Khalid al-Falih gave much more credibility to the idea that OPEC will consider action if oil prices remain low. West Texas Intermediate futures soared as much as 5 percent in trading Thursday after the Saudi comments, and later settled at $43.49 per barrel, up 4.3 percent.

Some OPEC members, particularly Venezuela, have been pushing the idea of production limits for months, but Saudi Arabia has repeatedly said it would go along only if all producers agreed. Iran, however, has steadfastly refused to accept limits, and it has been aggressively returning oil to the market in an effort to grab back the market share it lost while it was under sanctions for its nuclear program. Meanwhile, Saudi Arabia turned up the taps, and its production in July jumped to a record 10.67 billion barrels a day.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.