Oil and Gas Market Summary 10/11/16 IEA Confirms OPEC Pumping at Record Levels

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Oil Prices Daily Newsletter for 10/11/16

Oil prices pull back after IEA reports a jump in OPEC output MarketWatch

Russia s Rosneft boss Sechin says to to OPEC oil cap CNBC

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Transcript:

Hello, and welcome to the Oil Prices Daily podcast. Doug Stetzer here bringing you your daily recap on all the latest news, events, and trends influencing oil prices.

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Okay.

Let’s take a look at what happened with oil and gas prices for today, Tuesday, October sixth, 2016.

November crude traded lower by fifty-six cents or one-point-one percent, to settle at fifty seventy-nine.

On the heels of yesterdays really strong rally fueled by news that Russia would be joining and cooperating with OPEC in cutting production, today optimism was dampened a little bit by the reality that OPEC is continuing to actually pump at record levels.

This news has been well documented, but headlines came out from the IEA, or International Energy Agency, today that confirmed this. There are two sides to the IEA coin.

There’s a story out of Bloomberg saying, “IEA sees oil market re-balancing faster if OPEC respects deal”.

Now, of course, they’re giving some optimism here that this deal would actually work. It would take oil off the market if they could stick to it. Now of course, that is quite obvious if you lower your production, then things will re-balance faster.

However, the flip side of that coin, also coming from the IEA, is just showing that in September output supplies actually rose. That is the main story today, sending things a little bit lower.

However, considering how far prices have rallied, not too unheard of to think that prices might take a pause and consolidate while we await evidence of either production cuts or rising production from the US, or something that swings us one way or the other.

In the meantime, the market has managed to stay above fifty dollars, and really keep a lot of the rally from yesterday; it didn’t give the whole thing up.

Market still looking strong. Obviously trending higher.

We’ve gone from forty-four all the way up towards fifty-two, which was going to be a decent resistance level anyway if you look back to a highs in late June.

Again, this idea that it’s not too unheard of for the market to take a pause on the heels of this latest rally, and also to wait for evidence of this OPEC cut. Now, trading volume the last two days, very heavy, we’re back where we expect to be with about a million and a half crude oil futures contracts trading each of the last two days.

Yesterdays rally was really strong volume, and today’s consolidation also really on strong volume.

Now, one really interesting story related to Russia’s cooperation here, is that Igor Sechin, Russia’s most influential oil executive, and head of Rosneft, and well known for taking somewhat anti OPEC positions asks, and basically quote,

“Why should we do it?” “Why should we promise to cut when there’s no guarantee that anyone else will?”

A further quote from him, and of course, this story is in today’s newsletter, and we’ll put it in the show notes is,

try to answer this question yourself, would Iran, Saudi Arabia, or Venezuela cut their production?

He just doesn’t seem to believe it. Now, this of course, is going to play out between him and Vladimir Putin. He is out there talking up the deal, and now whether they have gotten all they need out of just the talk is hard to say.

This really being at the heart of the matter, will non OPEC production get onboard with this OPEC deal and the main non OPEC production we’re talking about here is Russia.

Still lots of questions. More questions really than answers, but a solid fact out of the IEA today discussing actual output out of OPEC is remaining strong.

We’ve talked about this over the last couple of weeks. That this isn’t really a surprise, that they are going to pump as much as possible going into this deal.

You have some players trying to maximize their revenues before they cut, this would be the Saudi Arabias of the world, and then you have other players who are exempt from the cut, really trying to set the bar as high as possible. You know that’s just what we expected.

While it’s not a surprise, these headlines do have the capacity to drive the market.

It wasn’t really too heavy a news day. I think most people are in wait and see mode as these details trickle out.

It’s just going to become a matter of the details of the implementation of this deal.

The question still remains: Where are the cuts going to come from?

We’re just going to leave it at that. We will be on the lookout for details that trick out of the current meeting as well as any guidance into the November meeting.

Of course, and in the meantime we will continue to watch EIA’s this week as they’ve been a source of surprises of their own.

That’s it for today. It’s going to be a short one, but remember you can always get our concise recap of all the news and events influencing oil prices each day by going to oilpricesdaily.com, signing up for the newsletter there.

Of course, you can also subscribe to this podcast on iTunes.

All right.

Thanks for listening to the Oil Prices Daily podcast, and we will see you tomorrow.

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