Image credit: Global Risk Management

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The main dynamics which are expected to be decisive for the oil price for now seems to be Saudi Arabia increasing their production, and the U.S. protectionist trade policy combined with the sanctions imposed on Iran.

The last couple of trading days the price has been quite volatile as, among other things, worries over the sanctions on Iran could remove a lot of barrels from the market. Then yesterday, Trump said that he would not complete a new NAFTA trade agreement before November. Furthermore, Trump stated that Saudi Arabia should increase production by 2 mbpd, which spurred worries that the market would open with a huge gap to the last closing pric. The gap was, however, modest. A new Reuters study found that Saudi Arabia has increased production by 700 kbpd, concluding that production currently is on almost the same level as at the end of 2016 - before the production cut started. Increasing production by 2 mbpd from one day to the other is likely not possible and Saudi Arabia does have a limit to how much oil it can produce - according to the IEA. it is about 12 mbpd. The discussion about how much oil Saudi Arabia actually is capable of producing has also been a subject to discussion in the media lately, and it is definitely a factor worth considering when assessing the oil price.

There is plenty of uncertainty at the moment and the prices are reflecting it.