Oil prices jump to highest since summer 2015

Oil prices up over 2 per cent on Saudi purge

Oil prices jumped over 2 per cent on Monday after Saudi Arabia’s crown prince purged a number of officials and members of the royal family in an anti-corruption crackdown over the weekend.

By 1:12 p.m. EST, Brent had gained $1.80 to sit at $63.87/barrel and US WTI had risen by $1.45 to $57.09/barrel.  The Canadian Crude Index rose $1.29 to $40.81/barrel.

Both Brent and WTI hit their highest levels since July of 2015.

“Whether it’s the purging of the Saudi ranks and oil rig counts ticking down and talk of OPEC extending cuts we’re seeing the volatility stretch this trading range,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management told Reuters.

According to Reuters, Saudi Crown Prince Mohammed bin Salman arrested royals, ministers and investors, as well as Prince Miteb bin Abdullah, the head of the National Guard and billionaire investor Alwaleed bin Talal.

One official called the arrests “phase one” of the crackdown.  The moves were part of Crown Prince Mohammed bin Salman’s efforts to cement power in the kingdom.

Saudi Arabia’s attorney general said those taken into custody have been questioned and “a great deal of evidence” has been gathered.

For now, analysts believe Saudi Arabia will maintain its current policy of propping up crude prices.  With the kingdom still looking at listing Saudi Aramco shares next year, higher oil prices are key a successful IPO.

At their meeting in Vienna at the end of November, OPEC members will discuss extending the cartel’s supply cut agreement to the end of 2018.  The pact is currently set to expire at the end of March 2018.

Saudi Arabia and Russia have both expressed support for extending the agreement. On Monday, Nigeria’s oil minister Emmanuel Ibe Kachikwu told Reuters Nigeria also supports extending the agreement, “as long as the right terms are on the table” concerning Nigeria’s participation.

Nigeria and Libya were both excluded from the agreement after years of unrest had hobbled the countries’ oil industries.

On Friday, Baker Hughes reported another cut in the US rig count.  Last week, there were eight fewer rigs in operation, bringing the rig count down to 729, the lowest since May 2016.

Analysts say crude supplies are tightening and demand remains strong.