When Saudi Arabia needs to quickly convince the oil market that supply is tightening, putting upward pressure on prices, nothing beats reducing its crude exports into the US.
Riyadh has promised to slash oil production next month by 10%, a unilateral cut that would reduce output to just 9 million barrels a day, the lowest since 2011 — save for brief disruptions from Covid and the Yemeni attack on its facilities. Crucially, as important as the cut itself, is where it’s going to be felt: The signals point to the US and Europe.
Focusing on the US would telegraph the reduction clearly to traders. Fluctuations in American crude imports, and ultimately, oil stockpiles have an outsize impact because Washington publishes the data weekly. In other regions, traders only get official figures on a monthly basis, or sometimes not at all, as in China and India.
It’s a tactic that Saudi Arabia used to great effect six years ago when the kingdom targeted American buyers to rewrite the market’s narrative. "Exports to the US will drop measurably," Saudi Energy Minister Khalid Al-Falih said in May 2017 after an OPEC+ meeting. By July, Saudi oil shipments to America had fallen to a 30-year low. The price of West Texas Intermediate, an oil benchmark, rose 20% from the day Al-Falih spoke to the end of the year.
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