Oil Prices Have Nowhere to Go but Up

Saudi Arabia's oil exports plunged to March 2021 lows, dropping to around 5.6 million barrels per day. There are no known forces on oil markets to offset the growing sea of missing oil taken out of global economy – especially, given the near-draw of the U.S.’s SPR, Strategic Petroleum Reserves, thanks to the signed by president Biden Inflation Reduction Act. At the time of writing, U.S. WTI is surging to $84.78/bbl retesting its August 23 high.

According to OilPrice.com with reference to the shipments observed by Bloomberg, Saudi crude oil exports to China fell to the lowest since June 2020, while ones designated to Japan and South Korea dropped to the lowest level since Bloomberg began monitoring them in 2017, and Saudi exports to the U.S. were the lowest in at least six years at just 81,000 bpd. In July, before Saudi Arabia implemented its unilateral production cut, the Kingdom exported some 6.3 million barrels per day.

The Saudi oil production cuts have severely tightened the market and started to draw down inventories, as commodity traders expect the Saudis to announce next week another extension of the cuts into October.