December 1st, 2016
Yesterday, at its regular meeting in Vienna, OPEC confounded many of the pundits and hammered out a historic production cut aimed at boosting oil prices.
In response to the announcement, oil prices went on a tear. WTI (U.S. oil futures) shot up 9.3%, while Brent (global oil futures, set in London) were up 8.7%.
Crude oil, midstream, and oil field service companies experienced double-digit gains almost across the board, with the sector experiencing its strongest percentage daily advance in almost three years. In contrast, the broader S&P ended up declining for the day.
While there is going to be some pullback, WTI is now approaching $50 a barrel, while Brent is already above that level.
But if you thought the months of negotiations were hard, wait until you see what’s next…
Because now that the Vienna Accord has been agreed on, OPEC will have to make sure it actually takes effect in January.
And then make it last long enough to rebalance the market, and permanently boost oil prices.
Here’s the only reason to think that might work…
November 29th, 2016
Russia has decided not to attend the pivotal OPEC meeting tomorrow in Vienna.
Remember, that’s the meeting where the oil cartel’s deal to cap or cut oil production, and boost oil prices is supposed to be finalized.
But OPEC can’t do that alone. They need Russia, the largest non-OPEC oil producer in the world, for any deal to be effective.
So it’s not surprise that oil prices are down this morning, following Russia’s decision to stay away.
Now, there’s still hope. Russia is still involved in the negotiations, but only on its own turf – and after being burned several times before, the country is now waiting for OPEC to come to Moscow with a done deal.
And that’s where the real problem lies. You see, OPEC itself is riven by internal feuds and rivalries, and may not even be able to agree with itself.
In other words, it’s crunch time in Vienna – for the oil cartel and for oil prices…