September 2017 was an historic month for the global crude oil market. West Texas rose to $52 and Brent rose to $58 as financial markets finally accepted that Saudi Arabia has been successful in brokering high compliance rates with last year’s OPEC and Russia output cut deals. In addition, Hurricanes Harvey/Irma and seasonal refinery maintenance added to demand for crude cargoes even as the US inventory glut eased. Turkey’s threat to militarily intervene in Iraqi Kurdistan if Erbil votes to secede from Baghdad in its referendum added a geopolitical risk premium to the oil market. Saudi Arabia and its GCC allies have managed to offset the surge in Libyan and Nigerian output that was not subject to the OPEC output cuts. Yet oil’s bull run is only sustainable if Saudi Arabia plays the role of swing producer in an OPEC that has cut output by 1.8 million barrels a day.
Saudi Arabia and the crude oil price surge Why September was an historic month for the global crude oil market
The Macro View
