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Unchanged OPEC policy guarantees global stock build in 2016

Published Friday, December 4th, 2015

We had the dress rehearsal of today’s OPEC conference in the form of an informal get-together of oil ministers in Vienna and we also kept a close eye on the other major event of the week, the ECB policy meeting. We provide details of the latter towards the end of the report and judging by yesterday’s developments it might have been the ECB that had a bigger impact on oil prices as the dollar lost 3.5% against the euro. As a result the majority of the main oil futures contracts regained most of the ground lost on Wednesday. WTI added $1.14/bbl, Brent $1.35/bbl and Heating Oil 537 points. Surprisingly, RBOB was lagging behind with a daily gain of one-third of a cent on a gallon.

And now back to OPEC. The hype has been going on for a few days or weeks now regarding today’s meeting. Will they or won’t they? Surely, they will since the majority of the member countries support a reduction in output. Hold on, that is insane because the Persian Gulf producers are against it. No, of course they will but not this time around. The Saudis are putting a proposal together to cut 1 mbpd next year IF three conditions are met. The first one is that Russia, Mexico, Oman and Kazakhstan participate. The second is that Iraq freezes production at the current 4 mbpd level. The third is that Iran also participates, said a senior OPEC delegate as reported by Energy Intelligence in the early hours of yesterday. But this proposal is not to be believed as all we needed was a few hours to have an unnamed Saudi source to deny the report saying that it was “baseless”.

to read the rest of the report, please click here

Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.