Crude Oil Declines Ahead of 30 November OPEC Talks

Crude Oil Declines Ahead of 30 November OPEC Talks

Crude Oil Declines Ahead of 30 November OPEC Talks


The OPEC meeting scheduled for 30 November continues to dominate Crude Oil’s price movements.

Reports surfaced late Friday that Saudi Arabia has walked away from a planned meeting with Russia and other non-OPEC producers after the Saudis were unable to reach an agreement with other OPEC members on long-discussed production cuts.

The meeting, scheduled for Monday, was cancelled.

OPEC ministers will be meeting again at the weekend to try to resolve the differences that separate members, particularly, Saudi Arabia, Iran, and Iraq.

The public face of the negotiations turn on issues including claims for exemptions and the use of members’ own production data Vs estimates from “secondary sources” to establish baselines from which to cut.

In reality, the negotiations are about the Key issue of sharing out oil revenues and diplomatic, military and economic power, which is what makes progress so difficult.

The 4% drop that we saw in Crude Oil prices Friday is a direct result of the political reality that OPEC has faced for many years. Why anyone believed it would change is quaint.

US refineries ran at 90.8% of capacity, a W-W increase of about 271,000 BPD. Imports fell by about 845,000 BPD, to around 7.6-M BPD on the week.

The Commodity Futures Trading Commission (CFTC) did not release its weekly Commitment of Traders (COT) report due to the US Thanksgiving Holiday.

The COT report will be issued Monday, 28 November.

I expect to see a deal of sorts next Wednesday, like a plan aiming at cutting OPEC’s output around 33-M BPD in Y 2017, with loose compliance.

Among the 14 members, Libya and Nigeria would be exempted, while Iran and Venezuela will decline to join.

Algerian Energy Minister Noureddine Boutarfa suggested on 18 November that 32.5-M BPD was the goal of the 30 November meeting.

I do not expect this to happen, especially without participation of Iran. It is also not likely that OPEC will provide details of the/any agreement, including quotas of the participating countries as well as the planned production of the non-participants during the frome.

Note: hedge funds are massively short on Crude Oil and if by some miracle OPEC and other producers do manage to reach agreement on production cuts, the short covering on the Crude Oil contracts will be huge and the price of Crude will spike.

HeffX-LTN Analysis for OIL: Overall Short Intermediate Long
Bearish (-0.27) Bearish (-0.26) Very Bearish (-0.52) Neutral (-0.03)
HeffX-LTN Analysis for USO: Overall Short Intermediate Long
Bearish (-0.33) Bearish (-0.26) Very Bearish (-0.62) Neutral (-0.11)

Have a terrific weekend.

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