ANS leads into $90s

Saudi and Russia supply cuts extended to end of year, turbocharging rally

Steve Sutherlin

Petroleum News

Alaska North Slope crude led the way into the $90s in feverish trading on the first day of September as expectations of a coming supply deficit dominated the thinking of marketplace participants.

Following the Labor Day holiday Brent joined ANS in the $90s Sept. 5 as prices surged higher still on news that Saudi Arabia and Russia would extend their combined 1.3 million barrel per day voluntary production cut through the end of 2023.

On Sept. 6, prices moved yet higher to levels not seen since 2022, with ANS adding 64 cents to close at $93.40, up a whopping $5.08 from its Wednesday Aug. 30 close of $88.32. West Texas Intermediate added 85 cents on the day to close at $87.54 and Brent added 56 cents to close at $90.60.

Prices were supported by American Petroleum Institute data indicating that U.S. commercial crude inventories fell by 5.5 million barrels and gasoline supplies fell by 5.1 million barrels for the week ending Sept. 1, according to a source quoted by Dow Jones Newswires.

U.S. Energy Information Administration figures were unavailable at Petroleum News press time due to the holiday shortened week, but average forecasts in a WSJ survey predict the EIA report will show crude stockpiles fell by 2.1 million barrels from the previous week and that gasoline decreased by 1.2 million barrels.

ANS notched a $1.33 surge on Sept. 5 to close at $92.76, while WTI jumped $1.14 to close at $86.69 and Brent leapt $1.49 to close at $90.04.

An official source from the Saudi Ministry of Energy said Sept. 5 that considering the extension of its voluntary cut of 1 million barrels per day, the Kingdom's production for the coming months of October, November, and December will be approximately 9 million bpd.

The source said the decision will "be reviewed monthly to consider deepening the cut or increasing production," adding that the additional cut "comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets."

When asked at a Sept. 5 White House press briefing about the price spike on the Saudi announcement, Jake Sullivan, national security advisor said, "what was announced today was a continuation of an existing policy, not a new set of cuts."

"So, as far as I'm concerned, the most important thing that the president is focused on is just trying to do everything within his toolkit to be able to get lower prices for consumers at the gas pump in the United States," Sullivan said. "It's really the price of a gallon of gas for the American consumer, not the -- the question of which country is doing what, here or there, that is going to be his ultimate metric for whether we're succeeding or not."

Meanwhile, President Biden touted his cancelation of the seven oil and gas leases owned by the Alaska Industrial Development and Export Authority in the Arctic National Wildlife Refuge, along with measures to close acreage in the National Petroleum Reserve-Alaska.

"My administration is canceling all remaining oil and gas leases issued under the last administration in the Arctic Refuge and proposing to protect 13 million acres in the Western Arctic," Biden said in a Sept. 6 tweet on X. "There's more to do, but we're taking action to meet the moment for future generations."

ANS sprang $1.52 higher Sept. 1 to close at $91.43, while WTI vaulted $1.92 to close at $85.55 and Brent vaulted $1.69 to close at $88.55.

On Aug. 31, ANS leapt $1.59 to close at $89.91, WTI surged $2.00 to close at $83.63, and Brent added $1.00 to close at $86.86.

$100 in reach if Saudi and Russia cuts continue

Goldman Sachs called for Brent oil to be $86 in December and $93 at the end of 2024, but now it sees "two bullish risks" to those predictions.

Goldman Sachs expects Saudi production to run 500,000 less than previously anticipated, which alone should add $2 to the per-barrel price.

Secondly, the investment bank warned that some of its assumptions for oil production may not hold up if OPEC+ cuts are further extended.

The bank expected that in January the countries would bring back half of the 1.7 million bpd cut announced in April, but now the bank sees a possibility of a longer extension.

"Consider a bullish scenario where OPEC+ keeps the 2023 cuts - fully in place through end-2024 and where Saudi Arabia only gradually raises production," Goldman Sachs said.

Brent oil prices would likely climb to $107 a barrel in December 2024 in that case, it said.

Although higher prices would help Saudi Arabia balance its budget and Russia fund its war machine, Goldman Sachs said triple-digit oil prices might prompt U.S. shale producers to boost supply and also drive more investment into clean energy.