There's a good argument that the recent declines in oil prices are on expectations that Saudi Arabia and the UAE will ramp up production in the months ahead.
The New York Times validated that today with this:
Sensitive to the appearance of sacrificing a principled stand on human rights for cheaper energy, the president does not plan to announce any oil deal during his stop in Jeddah. But the two sides have an understanding that Saudi Arabia will ramp up production once a current quota agreement expires in September, just in time for the fall midterm election campaign, according to current and former American officials.
Martin Indyk, a former Middle East diplomat for Presidents Bill Clinton and Barack Obama, said that the exact amounts were still uncertain, but that Saudi Arabia is expected to increase production by about 750,000 barrels a day and the United Arab Emirates would follow suit with an additional 500,000 barrels a day, for a combined 1.25 million. How much that would push down prices at the pump in the United States is unclear, and it may not be quick enough or deep enough to change the public mood before November.
That would be a huge increase in production but there are already questions about the reliability of those numbers. This is from Bloomberg's Javier Blas.
WTI crude oil has climbed in the past few minutes despite the bearish inventory report and this is likely why. It's now trading at $97.20.
