Investing.com -- It had been a while since the overbearing voice of the Saudi energy minister had been heard, and it arrived on cue Tuesday as speculators to oil producers sought for every means in pushing prices higher in the run-up to the peak summer demand for travel.
New York-traded West Texas Intermediate, or WTI, crude settled up 86 cents, or 1.2%, at $72.91 per barrel. WTI rose 0.6% in the previous session, extending last week’s run-up of 2%.
London-traded Brent crude, the global benchmark for oil, settled up 85 cents, or 1.1%, at $76.84. Brent also rose 2% last week, like WTI.
With Canadian wildfires already squeezing North American oil supply and U.S. gasoline prices up and running on expectations of a surge in road trips that would begin with next Monday’s Memorial Day holiday, Saudi Energy Minister Abdulaziz bin Salman issued a threat at short-sellers against pushing a barrel back below $70.
“Speculators, like in any market, they are there to stay,” Abdulaziz said at a panel discussion at the Qatar Economic Forum in Doha, sounding philosophical at first.
Then he went for the jugular: “I keep advising that they will be ouching. They did ouch in April. I don’t have to show my cards, I’m not [a] poker player…but I would just tell them, watch out.”
“Ouching” is Abdulaziz’s favorite expression for the hurt he intends to inflict on oil bears with surprisingly large output cuts by the OPEC+ alliance of oil producers which he controls. In early April, OPEC+ announced a 1.7 million-barrel-per-day cut, on top of an existing undertaking to shed 2.0M barrels daily.
Those in the know, however, say OPEC+ output cuts are often decided by Abdulaziz himself and his half-brother and Saudi Crown Prince Mohammed bin Salman, before being dressed up as a larger alliance effort, which in reality is only supported meagerly by other oil producers.
“Of course, actions speak louder than words and traders haven't been overly deterred by his words, despite the group having announced two sizable cuts in the last year that briefly shook the markets,” said Craig Erlam, analyst at online trading platform OANDA.
“Crude remains below the levels of December to early March and then April, but recent momentum has been more bullish. A break of $77.50 in Brent could signal a sentiment shift in oil markets after [they] repeatedly wobbled following the bank failures in the U.S.”
Since OPEC+’s most recent 1.7M barrel cut was announced, crude prices only went up briefly, before turning lower over four weeks — erasing some 15% of their value — before a 2% rebound last week.
Fundamentally though, oil is looking better in the near term from a surfeit of summer travel in the United States and elsewhere.
The front-month U.S. futures contract in gasoline, June, meanwhile, rose 0.5%, extending Monday’s rally of almost 3%, to settle at $2.6633.
The U.S. Energy Information Administration, or EIA, reported a gasoline inventory draw of 1.381M barrels for the week ended May 12, versus forecasts for a drop of 1.06M barrels. In the previous week to May 5, there was a draw of 3.168M barrels. Automotive fuel gasoline is the No. 1 U.S. fuel product.
The EIA will issue updated demand numbers for gasoline, distillates and crude oil on Wednesday.
Gasoline at U.S. pumps itself averages $3.54 a gallon, up five cents from the prior week, the American Automobile Association, or AAA, said.
The AAA and S&P Global Market Intelligence have forecast that there will be 42.3M (NYSE:MMM) travelers for the 2023 Memorial Day holiday travel period. The 7% year-over-year increase will result in 2.7M more travelers than the 39.6M in 2022.