Crude Plunges (Again) As Saudis Reverse 1/3 Of January Cuts, “Steve” Stunned

Earlier this morning, we noted that crude had put the brakes on a six day slide.

“The market is beginning to turn its attention to Wednesday with the Fed and the EIA reports,” Ole Hansen, head of commodity strategy at Saxo Bank said, adding that “[everyone] is still nervous but we are retracing a bit after that selloff.”

Or, we were retracing a bit after the selloff. Now, following reports that Saudi Arabia told OPEC the kingdom raised output to over 10m b/d in February, we’re retracing the retrace. Behold: more deflation….

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This seems like a good time to remind you of what we said over the weekend about the Saudis’ likely reaction going forward:

Well let me tell you what I think they’re going to do. I think they’re going to say “to hell with this” as the global economy gains its footing, inflation expectations rise in the US and Europe, and Riyadh doesn’t have to worry so much about causing a worldwide deflationary spiral if they push prices back down.

In short, I think they’re going to move to put US shale out of business once and for all unless something changes dramatically over the next couple of months. You can’t expect them to just sit on their hands while they’re made to look silly [by resurgent US production].

So there’s that. And here’s Bloomberg:

Saudi Arabia tells OPEC it pumped more than 10m b/d

Kingdom reverses one third of cuts made in January

And now let’s bring back in “Steve”, the angry reader who made his debut on Monday in the fourth installment of Heisenberg’s Hate Mail Bag:

Saudi Arabia is finished, its a country that’s as dead as deep fried monkfish. You can do all the wishthinking that you want, but you’ll be much happier dealing with the mathematical reality. The psychotic, saudi sand people are finished. Deal with reality pal.