1) Oil prices: The oil ministers of Saudi Arabia, the UAE and Russia met in St Petersburg on 25 May to review the OPEC and non-OPEC decision to cut production that has been in place for 17 months. This finally brought Brent prices to just over $80/barrel in mid-May following the Trump announcement of US withdrawal from the Iran nuclear agreement. Prices had risen in spite of a record US oil production of 10.3 mbd in February. By 25 May, US rig count had gone to 859, the highest level since March 2015.
According to reports, the ministers discussed a possible increase in production by one mbd. The Russian energy minister Alexander Novak said that the OPEC ministerial in Vienna in June could agree on a gradual easing. These discussions brought an immediate drop in prices: Brent futures fell by 3.4% to $ 76.10, while WTI fell by $ 3.04 to $ 67.67.
2) Saudi foreign reserves surge: Saudi Arabia’s central bank foreign reserves rose last month at their fastest rate for four years. The $13.3 billion month-on-month increase in reserves to $498.9 billion in April is the highest level reached in over year and reveals the extent to which a rebound in oil prices is strengthening the kingdom’s finances. The sharp rise in the reserves in April suggests the government is no longer under major financial pressure, after the Brent oil price climbed to about $75 a barrel last month from around $50 in the middle of last year.
Despite the increase, Saudi Arabia’s government is still running a budget deficit, and the Kingdom would need oil prices to rise to $85-$87 a barrel on the Brent crude index to achieve a balanced budget this year, according to the IMF.
June 4, 2018