Oil and Gas Market Summary – Oil Settles Above $50 -10/6/16

Oil prices daily podcast discusses all of the news, events, and trends influencing oil prices each day.

Be sure to visit today s oil prices daily newsletter for links to all news stories and sources mentioned in this podcast.

Links:

Oil Prices Daily Newsletter for 10/6/16

OPEC, non-OPEC producers plan informal meet in Istanbul to discuss Algiers deal Reuters

Oil tops $50 as traders anticipate Hurricane Matthew-related disruptions MarketWatch

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Transcript:

Hello and welcome to the Oil Prices Daily podcast.

Doug Stetzer here, bringing you your daily recap of all the latest news, events, and trends influencing oil prices.

Oil Prices Daily is hosted on the EKT Interactive Oil and Gas Podcast Network and is sponsored by Oil 101, a free online introduction to the oil and gas industry.

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Okay. Before we start talking about what happened today, just wanted to let you know that due to travel plans, I will not be publishing the newsletter or the podcast tomorrow or Monday. Have a great weekend, of course, and I’ll catch up with you next week. Now let’s get to it.

What happened today, October 6, 2016, a Thursday. November Crude trading up 61 cents or 1.2% to settle at 5044.

Here we are.

We got the settlement above $50 for the first time since June and really hard to deny right now that this is really looking like a strong break out. 3 main bullish factors converging started last week with the OPEC talks, larger than expected draw in the EIA which of course has been a trend, not just a 1 off event and then we’ve got this hurricane, looks like it’s baring right down on Florida here which we’ll talk about the potential affects of that a little bit more later in the podcast.

Three bullish factors converging really lending legitimate strengths to the market here and this moves may look to even gain more momentum as players who have been cautiously watching whether this market could get above 50.

Now maybe feeling they’re missing out.

Not a huge body of shorts to squeeze at this point which would really throw gasoline on the fire but again, momentum, hard to deny, technically looking like 52 and then just above 53 being the next resistance levels on the chart and so a little room to run here with not much getting in the way unless OPEC basically comes out and shoots themselves in the food.

Trading volume again pretty moderate but you can just over a million contracts for the second day in a row.

Solid volume, not super heavy compared to what we’ve been seeing lately but definitely wouldn’t call it a break out on light volume either.

Substantial move on good volume breaking through a key technical and psychological level really looking strong.

One quote out of a market watch article that we have listed at the top of the newsletter at oilpricesdaily.com,

“Hurricane Matthew is barreling toward the east coast. US oil supply continues to fall and OPEC and non-OPEC oil producing nations are getting ready to meet in Istanbul to hammer down details of a joint oil production cut.”

That’s right.

There is a new meeting has been announced that will take place October 8th to the 13th in Istanbul.

Again, prior to this announcement, the idea was that we were going to have to wait until the November 30th meeting in Vienna to learn more and get any details about the OPEC production deal.

I think very wisely, not only because there’s a lot of politicking to be done and a lot of negotiations still to be made but OPEC by doing this will keep chatter of the deal in the press.

They’re in the headlines. Here we go again. Starting next week, we will be watching every handshake, nod, move and press release coming out of an OPEC deal for an entire week and of course, these will be informal discussions and we’ll still have to wait until November 30th for the actual deal but they’re going to keep this in the headlines and as long as they can keep everyone towing the line, it’s going to continue to be supportive to the market.

There’s a section in the newsletter on some headlines regarding this update.

You can check it out there. There is of course always going to be dissenting opinions on this as OPEC has proven that they can do a lot of talk but not a lot of implementation and there are serious challenges to implementing this deal.

Gunvor, the oil trader, has come out saying:

there has been a lot of hype about OPEC and the re-emergence of OPEC in this wonderful agreement that they reached in Algiers. I think that may be a little bit premature.

Of course, we get above 50. We get strong numbers. They are pumping like crazy and it’s a huge question mark where the necessary cuts are going to come from and if production increases by the exempt countries nullifies any of this production cut.

Meanwhile, above 50 as we all know US producers really chomping at the bit and looking pretty good. Does this market have legs above 55? Can it get to 60? It’s really hard to see where the oil glut goes away under this scenario.

Really bullish because of the momentum and I think it’s safe to expect that algorithmic traders and momentum players are looking at this as a pretty solid breakout right now but will these numbers continue?

Again, we’re going to have to keep an eye on the EIA. We’re going to have to keep an eye on the actual production numbers coming out of some of these fringe producers in OPEC that have been given a pass in this OPEC cut or in this oil production cut.

The devil’s in the details and we’re just going to have to keep an eye on that.

Of course the other main story right now is this hurricane.

Hurricane Matthew baring down on Florida. Looks like it may regroup as it goes past the Bahamas and regain category 5 status. Just a huge storm. Really dangerous. 1 and a half to 2 million people being evacuated from Florida coasts.

Already mandatory evacuations across the east coast, especially in Barrier Island type communities and it’s a big storm. It’s going to be dangerous and it’s really got a possibility of doing a lot of damage and we feel for these people and it’s really unfortunate.

From the oil and gas perspective, what’s going to happen here and most of the stories pointing and alluding to this is that it’s really more of a demand destroyer than a supply destroy.

Supplies may be disrupted, they may be delayed and they may have to be diverted or sit off shore for a few days or maybe even up to a week. We could really see this from the supply side in EIA numbers for the next week, next 2 weeks but those cargoes, they don’t just go away.

They go somewhere else or they sit offshore and wait. They don’t disappear and go home.

It affects timing of supplies, not really amount of supplies. Whereas as far as demand, you really could see some economic damage down in Florida.

You see people short terms spike in demand, as everyone filled their tanks and is getting ready to evacuate but businesses are going to close. It’s a populous state. Businesses close, businesses slow down.

If there’s a lot of damage, you’re talking about weeks, months before these economic engines fire back up. Look at what happened to Hurricane Sandy up in the east coast.

We are going to have to wait and see what happens with this storm and if it stays on it’s track to heat the east coast of Florida and then head back out to sea or they’re starting to get some model indications that it could curve back and hit the east coast again higher up which would of course be devastating to some highly populated areas, that’s days off and hard to model not putting much weight on that but I did read that it’s a possibility so this storm could be a demand destroyer and there’s really no way to forecast how that’s going to happen.

These storms even with the best efforts are just unpredictable and you never know.

Those are the main stories affecting oil prices today. I think the most interesting one being this Istanbul meeting.

Again, i think a very wise move on OPEC to keep these headlines front and center, keep the chatter going, keep this talk of a deal really top of mind. In the meantime, we’re at 4 month highs and hard to deny is this …

Are we finally breaking out?

Are you going to call this thing a breakout yet? We’re settled above $50, it’s looking pretty strong and really not too much significant resistance as we approach the highs from June.

That’s going to be it. Again, I am out for the weekend so have a great weekend and we will catch up with you on Tuesday.

Thanks for listening and remember, get our concise recap of all the news and events that are influencing oil prices each day by going to oilpricesdaily.com and signing up for the newsletter or of course you can also subscribe to this podcast on iTunes.

Thanks a lot. Have a great weekend.

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