The oil patch rallied today after starting off the day in the red as news hit this afternoon that Saudi Arabia will be targeting the United States with sharp oil export cuts in January.
The world of crude oil is buzzing right now, as OPEC is currently meeting in Vienna, with a goal of reaching an agreement over production levels within the next 6 months. Oil prices dropped over 3 percent on Thursday as OPEC agreed to cut production. However, the cartel is waiting to decide on the actual size of reduction until after a discussion with Russia. This could delay the decision until Friday, when OPEC is set to meet with non-members.
Since the start of November, the two-year bull-run in the energy sector is facing one of its biggest challenges. Within the oil market universe, there are growing concerns of a global economic slowdown and oil demand following suit as the continued price collapse, almost 15%, from its October highs.
The geopolitical climate in the Middle East continues to intensify as the Saudi government is preparing to admit that Washington Post columnist Jamal Khashoggi was killed in the Saudi consulate in Turkey two weeks ago. President Trump has threatened to impose severe punishment on Saudi Arabia if it is proved they are behind the murder while the Saudi government has said they will respond with greater action if the United States moves forward. The threat of Saudi Arabia using their oil reserves as a weapon has the world on the edge of their seat.
As the U.S. sanctions on Iran are now a little over two months away with a start date of November 5th against Iranian oil exports, two other OPEC member nations, Saudi Arabia and Iraq, are continuing to position themselves to capture additional European oil market share as a result of these sanctions.