Technical & Fundamental Oil Reports Specialists

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Dangerous times

Published Tuesday, November 24th, 2015

The oil market was reminded yesterday that these are very dangerous times. This is a market ripe to be pushed around by headlines and rumour. In particular we were reminded that OPEC still retains enormous pricing power. It was OPEC’s policy change a year ago that has forced prices down to $40 bbl. A U turn on Dec 4 puts $80/bbl back into the frame. Prices would not touch the sides for over $10/bbl. No matter how large the market there is no liquidity when it is confronted by a major event with a direct impact. 

Yesterday the market was spooked into a $2 bbl rally on a benign statement from the Saudi Press Agency that a cabinet meeting chaired by King Salman had “stressed the Kingdom’s role in the stability of the oil market, its constant readiness and continued pursuit to cooperate with all oil producing and exporting countries”. There was nothing new. Unravelling the code it was simply a reminder at governmental level that Saudi Arabia is willing to consider an agreement on production control if other OPEC and non-OPEC members will share the burden. 

Nothing new therefore and the Iranian oil minister commented that if stabilisation of the market “is subject to cooperation with non-OPEC producers then it means we are going to do nothing”. But rumours leave scars and it was a reminder that no matter how bearish the fundamentals these are dangerous times to be short the futures market, at least for now. The Saudi news had WTI closing some $1.30/bbl above the day’s low but still 15 cents/bbl down on the day. Brent gained 17 cents/bbl, Heating Oil +30 points and the irrepressible RBOB +231 points.

to read the rest of the report, please click here

Posted by David Hufton