Saudi Arabia now controls the global oil price

[dan_s]

MY TAKE on the OPEC+ announcement to increase quotas more than expected and why oil prices moved higher on Monday.
1. Saudi Arabia has more accurate information about the global oil market than EIA and IEA put together.
2. Saudi Arabia knows that the global oil market is tighter than what we've been led to believe. Oil demand will be up ~2 million bpd from Q2 to Q3.
3. Saudi Arabia is the only OPEC+ country with significant spare capacity, so they now control the global oil price.
4. Since the current Paradigm is that the global oil market is over-supplied, it will take time for the consensus opinion to shift. BTW all of the Big 3 U.S. Petroleum inventories are below normal for this time of year. EIA will confirm this tomorrow.
5. FEAR of the Trade War is fading, which means FEAR of global recession is fading. Barring a global recession, the global oil market will get tighter in 2026. < Today I saw a chart that shows Lower 48 U.S. production could be over a million bpd lower at 12/31/2025 than IEA's forecast was just six months ago. As I have posted here many times, there is NO WAY that U.S. oil production can keep from falling at the current active rig count.
-------------------------
Note from HFI Research this morning with the title: Saudi Says "I control the oil market"

Saudi says, "Tight crude."

Saudi says, "No visible inventory builds."

Saudi says, "No more production cuts."

Saudi says, "$65 to $70 Brent."

Saudi says, "I'm in control."

That's the global oil market in a nutshell today. Like the childhood game Simon says, whatever the Saudis want, is whatever the Saudis will get. We first wrote about this in a WCTW report on May 27. We made it public today.

At HFI Research, we have been well ahead of the curve on the OPEC+ production cut that started at the end of 2023. Do you remember the commentary from oil pundits that once the voluntary production cuts unwind, oil prices will fall into the $40s?

Well, they are nonexistent now. OPEC+ or the V8 agreed over the weekend to decrease the voluntary production curtailment by 548k b/d, or 1 month faster than the 3-month truncated production increase before (411k b/d).

Oil prices ended higher, which befuddled a lot of market participants.

If OPEC+ is increasing production, why are oil prices moving higher?

Well, that's because it was never a cohesive production cut to begin with. Rampant cheating has been obvious for those who pay attention to OPEC+ crude exports.

And out of all the charts I've seen following the OPEC+ meeting, this one by Giovanni Staunovo is at the top of the list. < The chart shows that actual OPEC+ production has not increased as much as the increased quotas since actual production was already higher than the official quotas.

As you can see, the V8 production has finally caught up to the production ceiling. The cheaters are now in compliance and will finally be able to "compensate" for all of the previous overproduction from before.

So, what does this mean going forward? With the Saudis in full control, what does the incoming oil price path look like? Will Q4 global oil inventories surge like the consensus is expecting? < Answer, NO
---------------------------
Bottomline: Most of the OPEC+ countries are already at maximum production and several of them cannot produce up to the increased quotas.