Crude oil prices jumped a percent today on comments from Saudi Arabia’s Energy Minister Khalid al-Falih, who said he expected the OPEC+ production cut deal would be extended into next year.

Speaking to Reuters, Al-Falih said “We still have some time to go before we bring inventories down to the level we consider normal and we will identify that by mid-year when we meet in Vienna. And then we will hopefully by year-end identify the mechanism by which we will work in 2019.”

Global oil stockpiles are down considerably from their bloated state two years ago, but this seems to not be enough for some participants in the deal, apparently. There have already been warnings—from the IEA, no less—that with Venezuela’s steady oil production decline, the market could even swing into a deficit before the year’s end—and that’s despite the booming shale oil production in the United States.

It could be that Saudi Arabia wants to see a deficit, which would no doubt push prices up above US$70 a barrel, maybe even to US$80. That’s the price level that, according to Bloomberg Gadfly’s Liam Denning, Aramco needs in order to get the US$2-trillion valuation eyed by Riyadh. Related: What Trump’s Tariffs Mean For Global Oil And Gas

At the time of writing, Brent crude was trading at US$69.70 a barrel, with West Texas Intermediate at US$65.13, with some investment banks already predicting further jumps.

The geopolitical situation is certainly suggestive of such jumps. China has just responded to President Trump’s latest tariff plan against Chinese products, and while the response has been measured—US$3 billion worth of tariff-liable products vs US$60 billion—it may not be the last we hear from Beijing on the topic.

Trump has also appointed John Bolton as his new national security advisor, and this appointment, coming so soon after the replacement of Rex Tillerson with Michael Pompeo, has reignited fears of a more aggressive U.S. stance against Iran, with some even suspecting another war being planned in the Middle East.

All these developments are certainly bullish for oil, but Saudi Arabia is not OPEC’s only member, and it remains an open question whether everyone will be on board with yet another extension, especially with prices still on the rise.

By Irina Slav for Oilprice.com

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