Prices may have slipped from a lofty high of $73 to about $64 in June 2018.  But the fear that sent prices lower may have been a bit overblown on news that Russia and the Saudis hinted they may boost oil production by up to a million barrels a day – ending the production freeze.

At the time, the Saudis boosted their daily output in May to the highest level since October, ahead of an OPEC meeting where they could propose raising production even higher, phasing out months of voluntary cutbacks.

According to Rigzone.com:

Riyadh pledged to pump no more than 10.058 million barrels a day under OPEC’s output-cuts agreement with Russia and other allies outside the group. The desert kingdom usually boosts output in summer months as domestic demand for fuel rises.  Russia too is showing signs of a weaker commitment to supply cuts as its production increases before talks with OPEC about the future of the accord for limiting output. The nation boosted crude supply to the highest in 14 months in the first week of June as some companies breached their caps, a person with knowledge of the matter said.

Russia just pumped 11.09 million barrels of oil per day in the first week of June 2018.

Obviously, the news wasn’t by oil bulls.  It’s why prices fell.

But we have to consider that the output from Russia and the Saudis may not boost output at all.

“It remains to be seen if the new production levels [in Saudi Arabia] will just cover the previous loss of output from other countries or if they will create oversupply,” said Fiona Cincotta, senior market analyst at City Index, as quoted by MarketWatch.

Instead, analysts began to argue that Russia and the Saudis might just be replacing what the world was losing at the time.  For example, Venezuela oil production was still plummeting.  Then there’s Iran, which pumps 3.8 million barrels per day.  But given U.S. sanctions, Iran’s exports could also fall sharply from current levels as was argued.

At current prices, oil is greatly oversold.  Buy it here.