Oil and Gas Market Summary 10/4/16 – Oil Price Rally Stalls

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 10/4/16

OPEC sights set for now on $50-60 per barrel oil: PIRA s boss Reuters

Don t believe the hype: OPEC s cut will not balance a flooded oil market Forbes

Subscribe to this podcast on iTunes

Transcript:

Hi and welcome to the Oil Prices Daily Podcast.

Doug Stetzer 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 sponsored by Oil 101, a free online introduction to the oiling gas industry.

Are you ever asking yourself, what is the difference between upstream and downstream in oiling gas? Thousands of people a month search for answers to this question.  Join over 3,500 members, getting the answer to this today in the Oil 101 learning community at www.EKTinteractive.com.

Okay, so let’s talk about what happened in oil prices for today, Tuesday, October 4th, 2016.

November crude settled down just 12 cents or .2% to 48.69.

Trading volume again, was light, with about 830,000 Crude Oil Futures contracts changing hands.

This is really our third day in a row of sub 1 million trading volume which is really pretty quiet considering what the regular average trading volume is these day. 1.2, 1.3 million contracts being more than norm.

With light volume, the market keeps rallying today, if you look at the intraday chart, we did take a pause in the momentum. It was quite a volatile day which may forecast just people questioning how far this rally can go.

Questioning their positions, very headline driven at this point and very susceptible, I would imagine, to any surprise headlines.

The intraday chart showed that we did open up towards the highs, actually went above 49 dollars at one point and then traded off pretty sharply around 10 o’clock, just to bounce back.

Really, a volatile situation, people with their fingers on the trigger here. We did notch new highs above 49 before tapering off in the afternoon, settling down just slightly.

I think one of the things that’s causing this lack of volume is the fact that we’ve rallied 9% or so since just before OPEC made it’s announcement last Wednesday.

The market’s really come pretty far, 50 dollars a pretty crucial level as we’ve spoken about. If you go out further in the curve, 2017, 2018, getting into the mid 50’s on average now, allowing producers to hedge and lock in those levels.

A big question as to whether the OPEC deal will even actually happen and where these cuts are going to come from, on top of the fact that, has this rally really caused them to basically shoot themselves in the foot anyway?

Is non OPEC production going to fill in any gaps that OPEC cuts may provide?

That’s really the dominate question right here, while the bulls have certainly had a good run, really are you looking to add positions up here towards 49 dollars or are you pretty nervously looking to take profits. I think that’s one of the things you’re seeing as these rallies are capped on light volume.

The market waiting for the next shoot or drop as far as a dominate headline to confirm this large move that its had.

Of course, there’s going to be a lot of job owning back and forth from OPEC until the meeting in Vienna on November 30th, which of course leaves us 2 full months of waiting to see on that with plenty of opportunities for countries to create a lot of chatter around the topic.

EIA Weekly Report

In the meantime, I believe we will see some emphasis fall back on the EIA, lots of surprises out of the EIA.

All told drawing over 25 or 28 million barrels out of crude oil inventories in September. Some domestic contraction there.

Of course, the market very well over supplied despite those draws but is that a trend?

Those headlines will continue to drive market action. For tomorrow’s EIA’s, it looks like consensus estimates are for a build of about 2 and a half million barrels.

Now, I’ve obtained the numbers from our partner and contributor Andrew Lebow, he is a partner at Commodity Research Group.

He has actually bucked the trend this week and has forecasted a draw of just under a million, about 700,000 barrels, that’s his estimate for the EIA inventory statistic tomorrow.

On top of that, he has called for a draw of 800,000 in gasoline and a slight build of 100,000 barrels in distillates. Additionally, he expects the refinery runs to continue to contract coming in another half of percent over last week.

Again, the EIA has been throwing serious curve balls at the analysts that’s really been a difficult job forecasting those numbers recently. The continued draw of inventories has been unexpected as far as that crowd is concerned.

Another one there, especially considering this consensus, estimate of a pretty sizable build, that might be the thing this market needs to regain it’s momentum and head back up towards 50.

We will see that with those numbers coming out tomorrow. Latest out of OPEC, of course like we said, there’s going to be a lot of talk and chatter back and forth as we approach this meeting and plenty of time for that, unfortunately.

A couple of stories here worth mentioning, talking about Iran.

One is that, Iran is reaching the 4 million barrel per day mark and so with the goal of getting up to 5.2 or 5.7. Again, they’ve got the green light in this deal to regain their pre-sanctioned levels.

Here the idea, is Iran going to be the country that maybe while supporting the deal on paper, makes it so that it’s impossible to actually meet this draw in the production cut that they’re trying to do because they’re adding production just as everyone else is trying to cut.

Will it make it so that it just doesn’t matter what the actual deal is? Very interesting to keep an eye on there.

Yet, at the same time, the Iranian leaders out there telling Venezuela it’s essential to raise oil prices. Basically, they’re trying to play both sides of the coin it looks like.

They’re saying, “We will not cut, but these cuts need to be made to support prices.” Maybe these cuts need to come from people such as Venezuela and of course, Saudi Arabia.

There’s going to be plenty of this going on over the next 2 months and we will keep an eye on it.

Now, if you want to look at the other side of the argument, Forbes contributor Chris Helman has a good article out today titled, “Don’t Believe the Hype,” OPEC’s cut will not balance a flooded oil market.

Really, he went on to point out all the different ways that production from non OPEC and the OPEC producers themselves, these proposed cuts are just not enough to take real oil off the market considering demand is really not that strong.

A quick quote out of this saying,

The market should brace itself for significant volatility if last week is anything to go by.

Just the idea that without true conviction and a lot of question marks over the next couple of months, every headline is going to drive prices and we should just expect a choppy market.

Especially now that it’s looking a little toppy on this move with not a lot of volume being traded … Supported the follow through on rallies.

Point out a quote out of a story, of course, these lengths are in the newsletter and we’ll put these one’s in the show notes as well for the Oil Prices Daily Podcast.

OPEC “Sights set for now on 50 to 60 dollar per barrel oil,” from PIRA boss.

A quote out of this saying,

“The policy to push for market share is over, it’s a matter now of going back to managing the market.”

The link to this story is in the newsletter, but that’s about it. Really, unfortunately that’s about what I expect in the short to medium term borrowing any real surprises, it’s going to be a lot of analysis of every word coming out of OPEC.

Of course, the real proof in the pudding here is whether some of these players are actually being successful in building their production.

Such as Nigeria, Libya has had some success recently. They are regaining some momentum.

Of course, Iran and Iraq, what their true production levels are. In light of those gains, where does this cut come from?

That’s what the whole market is, that’s the million dollar question. That’s what everyone’s going to be keeping an eye on and so you just have to keep track of these numbers over the next couple of months.

Remember, so we will try to keep tabs of this for you. Get our concise recap of all the news and events that are 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, thanks a lot for listening and we will talk to you tomorrow.

The post Oil and Gas Market Summary 10/4/16 – Oil Price Rally Stalls appeared first on EKT Interactive.