Saudi Arabia will increase oil production by 300,000 barrels a day, a significant jump. The price of crude should drop sharply when the market opens.
According to the FT "Analysts said it was likely that Kuwait and the United Arab Emirates, which have spare production capacity, would follow the Saudi lead and raise output." If other OPEC members follow, oil could be pressured back toward $100 as supply increases and speculators move out of the market and cover bets on prices moving above $130.
The leading OPEC members are almost certainly worried about the incredible run oil has had to reach over $127 a barrel. At some point, and that point may be now, the price of crude will throttle the economies of the West and emerging markets like India and China. A sharp drop in demand would leave most producing nations with expensive oil-producing infrastructures running well below capacity.
The tipping point for oil prices may have arrived.
Douglas A. McIntyre
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