[ad_1]
This comes as no surprise, considering the current macroeconomic backdrop is fuelling a “perfect storm” Commodities. That’s the view shared by a long list of the world’s most powerful Wall Street banks, who have described the current economic climate as “The Golden Age of Trading”.
In this year of unthinkable macro surprises – traders have turned their attention to the next big money-making opportunity brewing on the horizon: Saudi Arabia’s aggressive Oil policy aimed at getting prices back above $100 a barrel.
Understanding Saudi Arabia’s Impact on Oil Prices
Oil prices rocketed above $90 a barrel for the first time in 2023 on Tuesday after Saudi Arabia announced plans to extend its 1 million barrel per day production cut until the end of the year.
These cuts are in addition to the 1.66 million barrels per day output reduction other members of OPEC have put in place until the end of 2024.
As a result, Oil prices have been on a parabolic run since June – rallying over 25% from their 2023 lows of $63.64 a barrel.
And the rally might not stop there!
Saudi Arabia has not ruled out the possibility of further production cuts this year, if necessary.
A move which could send the price of Oil soaring above $107 a barrel by December before rallying to more than $130 a barrel in 2024 and stay there for years, according to Goldman Sachs.
Interestingly, it was only a few months ago, when Saudi Arabia needed Oil prices trading above $85 a barrel, in order to breakeven.
But with every day that goes by, Saudi Arabia’s breakeven Oil price continues to climb higher due to the unprecedented spending splurge from its Sovereign Wealth Fund on buying expensive footballers like Cristiano Ronaldo and building revolutionary mega projects such as the $500 billion Neom City.
This ultimately means, Saudi Arabia’s “breakeven price” for Crude Oil now sits at around $100 a barrel – and as we have already seen, they are prepared to do whatever it takes to achieve their goal!
The Quest for High Oil Prices and U.S. Election Impact
Another reason why Saudi Arabia and its closest ally Russia, may want Oil prices above $100 a barrel, according to Goldman Sachs, is because of the “political importance of U.S gasoline prices.”
Pump prices tend to play an outsized role in voter perceptions of the economy and state of inflation, particularly before an election. Historically, no U.S President has won an election when the average price for a gallon of gas has surpassed $4 at the pump.
So far this month, gas prices have already topped $3.84 a gallon. While that remains below the record high of more than $5 reached last summer – it’s still a whopping 60% above the level when President Biden entered office in January 2021.
Commodity Price Forecast
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
[ad_2]
Source link
