Oil has hit a three-month high above $65 a barrel following Trump’s China trade deal. That is a level not seen since September’s drone attack on Saudi Arabia briefly knocked out some 5% of global supply.
Brent crude is up about 21% for the year, but still below April’s 2019 high of $74.5. Oil bulls were given further cheer when Saudi Aramco’s stock briefly soared above the symbolic valuation level of $2trn on the Saudi Tadawul index, notes Avi Salzman for Barron’s.
Yet Bernstein analysts reckon that at current prices the company is worth closer to $1.36trn. Political influence makes it “hard to argue that Aramco’s current price is a true ‘market price’”.
Oil exporters’ cartel Opec gave further encouragement to the bulls this month after agreeing to new production curbs, says Sarah Toy in The Wall Street Journal. The oil cartel and allies will cut output by 500,000 barrels a day until April, adding to an already existing 1.2 million barrels per day cutback.
Yet the oil rally stalled at the start of this week because of scepticism over whether the deal will truly reduce global supplies next year. Nigeria and Iraq are already struggling to honour existing commitments.
The International Energy Agency expects global oil inventories to rise by 700,000 barrels per day in the first quarter of 2020 due to weak global demand and rising output in non-Opec states. That could keep a lid on oil.