May 23, 2023
Oil rallies as Saudi minister warns short sellers of pain ahead
We haven't invested enough on the supply side to meet energy demand growth: Head of commodities
Oil rose to near US$73 as traders evaluated a warning from Saudi Energy Minister Prince Abdulaziz bin Salman to short-sellers, offsetting a lack of tangible progress in US debt-limit talks.
“I keep advising them that they will be ouching — they did ouch in April,” Saudi Arabia’s top energy official said at the Qatar Economic Forum. The perceived threat was enough to send West Texas Intermediate climbing as much as 2.5 per cent — the most in nearly a week — and notably diverging from broader market sentiment, which fell as a solution to the debt-ceiling crisis remains elusive.
“As amusing as it may be to hear the Saudi energy minister issue a warning to oil short-sellers, what ultimately matters is what Saudi Arabia, and, more broadly, OPEC, do rather than what they say,” said Pavel Molchanov, an analyst at Raymond James. “Actions speak louder than words.”
Saudi Arabia, the de facto leader of the OPEC+ cartel, was among nations that surprised the global crude market with a supply cut that took effect this month. Several OPEC delegates have said there’s no need for further action now as curbs already in place will help tighten global markets. Still, Prince Abdulaziz has been known for orchestrating surprise interventions.
Crude has retreated by about 9 per cent so far this year as China’s lackluster recovery since the lifting of Covid restrictions and the U.S. Federal Reserve’s most aggressive monetary tightening campaign in a generation weigh on sentiment. Russian oil exports have also remained robust in the face of sanctions, with flows not showing signs of the output cuts the country insisted it was making.
- WTI for July delivery rose 86 cents to settle at $72.91 a barrel in New York.
- Brent for July settlement gained 85 cents to settle at $76.84 a barrel.