Saudi Arabia tests market reaction

In January, the Saudis surprised the market when they announced a voluntary production cut of 1 mln b/d in February and March to support market balance and prices. Now WSJ sources say that at the March OPEC+ meeting Saudi Arabia will announce an increase in oil production by the same 1 mln b/d starting in April.

Will this event cause at least a correction in the oil market, or will it remain unnoticed? Experts from Eastern Gate Investment Company answered the question posed by Fortrader magazine.

- Most likely, the Saudis are probing the market for a reaction to the information about production increase. The Saudi Energy Minister Prince Abdulaziz bin Salman himself states literally that "uncertainty is very high and one should be extremely cautious". Therefore, it is not a fact that the production increase will take place.

The current oil price situation suits everyone. The Saudis and all other producers have more than compensated for the production cuts after rising above $60 per barrel. It is unlikely that anyone will want to break such a favorable situation.

But it should also be realized that the current increase is also due to abnormal cold weather and shrinking oil in storage, and OPEC countries will want to be the first to take advantage of this situation to sell more oil to replenish reserves. In any case, OPEC members have become more cautious and will not rock the boat they are sitting in.