Saudi Crackdown Fuels Rally
Oil markets were subject to fresh volatility on Tuesday in response to a political purge in Saudi Arabia which saw the government cracking down on several princes and ministers accused of corruption. This move is seen as heightening geopolitical tensions in the region, leading to the rally in Oil. As Saudi Arabia is head of the OPEC pack, any news of political tensions tends to underpin oil, and as the market was already moving in a bullish trend, with investors expecting OPEC to extend their production cut, the news has simply added fuel to the fire.
OPEC Expected to Extend Output Curbs
OPEC has been coordinating with Russia and other key non-OPEC producers since January to reduce oil output by around 1.8million barrels a day. The latest data shows that OPEC output fell once again in October and that compliance with the deal’s parameters moved to its highest level. The group is widely expected to extend the agreement when it meets later this month in-line with comments from political leadership in Saudi Arabia and Russia as well as pressure from major oil companies.
Tensions in the region were already boiling over following the firing of a rocket from Yemen into the Saudi Arabian capital of Riyadh in response Saudi Arabia waging war on Iranian-backed rebels in Yemen.
Billionaire Apple Investor Arrested Ad Part Of Crackdown on Corruption
The purge was led by the crown prince of Saudi Arabia, Mohammed bin Salman, and has seen the arrest of key persons such as Prince Alwaleed bin Tala, a billionaire investor who has concerns in Citigroup, Apple & 21st Century Fox. Kingdom Holdings, which is Alwaleed’s investment group, has publicly commented saying that the Saudi government has assured its “full confidence” in the group which oversees $12.5bln worth of assets.
The rally in Oil has now seen price surge above the 2016 high around 55.39, moving to its highest level since 2015. A retest of the broken 2016 high is likely to find support and while above that level, a key focus will be on a test of the next major resistance around 62.47 which is the 2015 swing high as well as bullish channel resistance.