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Anyone doubting the relevance of Saudi Arabia to world oil markets would have seen the light on 5 November when oil prices were jolted higher by rumors of a pipeline explosion in the kingdom. Brent crude oil futures, the world benchmark, were on the rise on the back of a lower than expected stock build in the US when the Saudi incident sent them even higher. Brent crude oil futures rose by more than $1.5/B on fears of a possible supply disruption from the world’s biggest oil exporting nation.
Oil markets have had their eyes fixed on the OPEC kingpin in the weeks since oil prices began the last four months’ 25% slide for a sign of the kingdom’s intentions with regard to supply. With no official word from Riyadh, the market has been rife with speculation. Saudi Aramco’s official selling prices are being scrutinized for clues on price direction. Leaks purportedly emanating from confidential briefings by Saudi Aramco to analysts suggest Riyadh would tolerate a price of $80/B, a number that has not been enunciated by Saudi officials publicly. Saudi Arabia’s silence has led to chatter in print and amongst energy pundits as to what, if any action, it is willing to take to defend price and at what level. One analyst went as far as to suggest that the pipeline explosion, which turned out to be an accidental explosion of a diesel pipeline during maintenance, provided the Saudis with an excuse to cut supply without appearing to do so.
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