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Panic over Saudi oil supply has subsided: Reza Amanat, Argus Media

Most of the consumers and producers are quite comfortable with prices in the 60s.

ET Now|
Sep 18, 2019, 09.58 AM IST
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The panic or the worry that this outage in Saudi Arabia might take months to clear has obviously subsided, says Reza Amanat, Deputy Editor, Crude Oil Markets, Middle East and Asia-Pacific, Argus Media. Excerpts from the interview.


Yesterday markets were clearly reacting quite extremely to the uptick in crude, today we are seeing a slight cool off. There seems to be a little uncertainty as to whether or not we will actually see those prices ease off or whether we should still be aware of any geopolitical risks and the situation could potentially still be volatile. How would you assess it?
I would agree with that. There is obviously a geopolitical risk premium about the environment at least. That is not going to go away any time soon. But overall, the pressure pushing up prices has eased and after the announcement from the Saudis last night, prices came off. ICE Brent came off more than $4 and WTI futures also came off almost $4. So, the panic or the worry that this outage in Saudi Arabia might take months to clear has obviously subsided.

How does one really understand the supply-demand equation? Is there going to be a disruption and could that be permanent?
When it pertains to Saudi Arabia or you are talking more generally?

I am talking about generally because if crude prices go to $60-65, that clearly will have an impact on demand. Ultimately, it is the consumer who decides the price.
Well, most of the consumers and producers are quite comfortable with prices in the 60s. I do not see any demand destruction at those levels. But if you get towards 80s, then it is probably more of a case of disruption. Just before the incident in Saudi Arabia, the main goal of OPEC and their non-OPEC allies were to get stock levels down. They were basically saying that the stock levels are too high globally and we should get them down.

One of the things that stopped prices from getting towards $80/barrel was that global stock levels were higher than the five-year average. In that sense, prices in the 60s are not beyond expectation.
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