An unexpectedly aggressive statement about cutting oil production by the OPEC cartel has sent the oil price soaring. Brent crude, the international benchmark, gained nearly 6% in a matter of hours yesterday (Sept. 28).
Amazingly, that move wasn’t even enough to make the top 10 of biggest one-day moves in the oil market so far this year. These are topsy-turvy times for crude, to say the least.
Since the oil price took a major tumble in late 2014 thanks to sputtering economic growth and a glut of supply, the market has lurched from bear to bull territory, and back, more than a few times. Brent is now almost 20% up from its early August low, on the cusp of another bull run.
The details of OPEC’s proposed production cut remain sketchy. The speed with which a plan to simply freeze output fizzled at the start of the year, roiling oil markets in the process, does not augur well. Iran, Nigeria, and Libya are not keen on cutting production, so the bulk of the burden will fall to Saudi Arabia.
Even more than usual, oil traders will hang on the Saudis’ every word in the coming weeks, wary of being caught out again.