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Bloomberg reported Monday that the surprise OPEC+ production cut was aimed at speculators betting that oil prices would fall, representing a return to a previous tactic used in 2020.
The report stated that at the time, Saudi Energy Minister Prince Abdulaziz bin Salman famously stated he wanted “the guys in the trading floors to be as jumpy as possible.” He also promised that “whoever gambles on this market will be ouching like hell.”
So far, the move to target short sellers seems to have gone to plan, with investors wrong-footed as oil futures jumped as much as 8%. However, it has also prompted concerns about inflation once again.
Citing people familiar with the matter, Bloomberg wrote that OPEC+ started to see the need for a change in oil policy on March 20, when Brent crude hit a 15-month low as the banking sector uncertainty threatened the economy.
The publication’s sources added that the Saudis believed short sellers were due a reminder of the pain OPEC+ can still inflict on them, with the group holding back more than one million barrels of oil from the market in a decision that was made in just a few days amongst a “very tight circle.”
Bloomberg added that some delegates only found out a day or two before the announcement, with two officials “completely blindsided by the decision.”
The report states that the announcement on Sunday was chosen for maximum impact and came despite the fact that previous comments suggested output would be held steady for the year.
