Oil and Gas Market Summary 9/28/16 – OPEC, EIA Surprise

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

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Oil Prices Daily Newsletter for 9/28/16

Oil prices rally on report of OPEC deal WSJ

How actual nuts and bolts are bringing down oil prices Bloomberg

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Transcript:

Hello and welcome to 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. Sponsored by Oil 101 a free online introduction to the oil and gas industry.

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Okay, so let’s talk about what’s happened for today Wednesday, September 28, 2016.

Oil prices today, up $2.38 for 5.3% to 47.05.

A huge rally on the heels of reports and rumors that OPEC has actually reached a deal to cut production. Obviously caught the market off guard a little bit.

Was really getting the feeling the last couple days that there was nothing going to be accomplished at the Algeria meeting and triggers looked to be kind of putting this behind them as the market was chopping around and really lacked direction.

However, with these rumors, really lending support to the market, rumors of a cut of production combined from OPEC of about a million barrels a day.

Really given us something to stand on here.

Of course as we mentioned, this was an informal meeting. This is not a deal that is set in stone. The idea would be that they reached a consensus in that they have to hammer out some details.

They’re going to have to figure out where this million barrels is going to be cut from. What is seems like is that most of it’s going to be coming from Saudi Arabia.

As their concessions to getting this deal done was really given Iran and some of the other players what they wanted. Which was not to be freezing their production at current levels, but to allow them to get production back up to levels from before sanctions.

Before some of the problems they were having and leave some room from them. Basically Saudi Arabia giving in to Iran’s demands. Really interesting shift in power from the Doha meeting where Saudi Arabia was really trying to strong arm everybody.

Technically market, a nice break out on the range that we have seen. We’ve been putting those trend lines on the charts on the Oil Prices Daily Newsletter.  Really a nice break out out of this consolidation that has been going on basically since the middle of August.

We mentioned yesterday that perhaps it would be the EIA statistics that lent some direction to this market. Once again, the EIA out with a surprise report showing that crude oil inventories drew by 1.9 million barrels.

Consensus estimates were upwards of 2 million-2 1/2 million barrels of a build. Really interesting there. It gave a quick spike to the market. You look at the entry today chart on the newsletter here.

You can see that the initial knee jerk reaction was to buy on the news here, but it immediately got sold into. Then the market was actually drifting off down towards the lows of the session near around 44 1/2 before these rumors out of Opec started circulating.

That really rallied the market from those lows all the way up to a high of around 4740. A three dollar rally off of the lows on this OPEC news.

Really just a lot going on today with all of these different things flying around.

Looking at trading volume for today. Was expectedly strong. With about 1.4 million contracts trading in crude oil. Again, just a real high volume, big move day with a lot of conviction and was really what the market needed to wake up out of its slumber and start moving forward here.

Really looking like a break out. We will see if we are able to continue this momentum. If this also gets some of these technical players and some momentum type players behind this move.

Which of course can really start leading to some interesting action. If the fundamental players, the funds, the technical guys, and the algorithms are all in line, things could really start moving quickly here.

An interesting note on the crude oil spreads. CLZ6/CLZ7 a very heavily watched and heavily traded spread has now come in from about $5 to about $4.

Big move there as the front of the curve has rallied. As we move from these lows of 43 up till 47. Next resistance right up around $50.

We’ll see if those are the highs from August. Then the contract highs from back in June really around 53. Those are kind of the next key resistance areas to watch. $50 of course a big psychological level.

As soon as you get above that you’re going to start hearing about US shell production ramping up again. Some interesting articles lately about how they have weathered the storm financially and are waiting in the wings to crank it up as soon as they get any kind of glimmer of hope here.

How far can this rally go? We have to wait and see. The US production is down about 500,000 barrels from its peak. They’re waiting there to eat into any market share that OPEC s willing to give up.

Finally, as far as non OPEC, non EIA news. Other interesting stories I found about researching the Oil Prices Daily Newsletter. I really liked this story out of Bloomberg called How Actual Nuts and Bolts are Bringing Down Oil Prices.

This is really making a mention of how the producers have been coming way more efficient. Much more efficient in their production techniques and how the high oil prices allowed them just to be free wheeling and spending the money as much as they want.

A really interesting quote out of this story that I had not heard of and really has long term implications as far as how the EMP companies operate with these key oil fill services company.

The quote goes like this,

“Earlier this year, the heads of some of the world’s biggest oil majors, including Saudi Ramco, BP, Rep-soil and Stat Oil, met behind closed doors to discuss a push-to-cut cost by standardizing the equipment used in the exploration and production.”

You’ll notice that a lot of the big majors out of the US were not mentioned in this. We’ll see. Very interesting. The idea that EMP is becoming much more of a standardized, almost like assembly line type operation as opposed to literally each well, each rig being custom made.

Each operation being unique. How this could affect prices in the long run. Just really leading to a healthier EMP sector as we look forward.

That’s it for today. Interesting day. Of course, we really haven’t seen follow through on a lot of these big moves lately. Is this the time to see if break out? Finally we might see some action here.

Thanks a lot. Remember, if you’re interested in getting the email, the Oil Prices Daily Newsletter with the links to all the stories that are influencing oil prices today and that we’re mentioning in the podcast, go to oilpricesdaily.com and, of course, you can always subscribe to this podcast on iTunes.
Thanks a lot and have a great day.

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