Part of OPEC's power is its ability to make markets believe it can control prices.
Lately, they've been offering hints that they have more spare capacity. The main reason to do this is to bluff producers elsewhere on the usefulness of drilling more. Why drill and explore when Saudi Arabia can just pump?
On the other side are a group of oil traders and analysis (including me) who have been saying for years that OPEC doesn't have the spare capacity that it's touted. At most, they can surge production for a few months but the point of that capacity is to counteract some kind of supply crisis.
Now, the truth is out.
Reuters reports that French President Emmanuel Macron was overhead on the sidelines of the G7 talking with US President Biden.
"I had a call with MbZ," he said, referring to Sheikh Mohammed Bin Zayed is the President of the UAE. "I'm at a maximum, maximum (production capacity). This is what he claims."
"And then he said (the) Saudis can increase by 150 (thousand barrels per day). Maybe a little bit more, but they don't have huge capacities before six months time," he said.
Officially, Saudi Arabia is producing 10.5 mbpd and has 12-12.5 mbpd of capacity. The UAE is producing at 3 mbpd and has capacity for 3.4 mbpd.
I don't ever expect the UAE or Saudis to admit publicly that they're out of spare capacity, so this is the best we're going to get. But if it's true, it's wildly bullish for crude.
WTI crude oil is up $2.26 to $109.96.
