Saudi Arabia Pushes OPEC+ for Increased Production as Oil Prices Near $60

Saudi Arabia is pushing for increased oil production within the OPEC+ alliance, aiming to regain market share and stabilize oil prices. This move comes as investors are heavily betting on Brent crude oil prices falling below the critical psychological level of $60 per barrel. The surge in trading activity for December-expiring put options at $55 and $60 has led to a significant increase in open interest, equivalent to 120 million barrels of oil. The trading volume for the $55 put option reached a new high since April, when OPEC surprised the market by announcing a supply increase three times larger than initially planned.

The upcoming OPEC+ meeting, scheduled for Sunday, will discuss the resumption of 1.66 million barrels per day of suspended supply. Saudi Arabia is advocating for an accelerated increase in oil production. This has led to a heightened demand for downside protection, with the price of December-expiring $60 put options rising from 59 cents to $1.35 in just three days. The premium for put options relative to call options has reached its highest level since early August.

The recent weak U.S. employment data for August has raised concerns about oil demand, further pressuring oil prices. On Friday, WTI crude oil futures fell below $62 per barrel, while Brent crude oil dropped to around $66 per barrel, continuing the downward trend from earlier in the week.

Saudi Arabia's push for increased production is driven by a desire to regain market share lost to competitors, including U.S. shale oil producers. Over the past five months, the OPEC+ alliance has accelerated the restoration of previously suspended production, now facing the decision on how to handle the remaining 1.66 million barrels per day of suspended supply. Energy Aspects Ltd. reports that the group is seriously considering an early resumption of the final batch of suspended supply.

Further increases in production could exacerbate the supply surplus predicted by the International Energy Agency for the fourth quarter, adding downward pressure on oil prices. Analysts and traders anticipate a global oil surplus by the end of the year. If oil prices fall below $60 per barrel, it would be a favorable outcome for the U.S. President, who has repeatedly attempted to lower oil prices through public statements.