West Texas Intermediate for November delivery received another zap to the upside courtesy of our friends from the Organization of the Petroleum Exporting Countries. As of 12:30pm EST, Light Sweet Crude Oil is up almost 3% at $51.00, HO is up $0.0361 at $1.7713, and RBOB is up $0.0321 at $1.5915. A plethora of headlines with one main theme, OPEC doing everything it can to keep prices afloat and stabilize the oil markets: “OPEC confident that market is rebalancing after years of oversupply”, “Saudi Arabia to cut crude allocations for November”, “OPEC considers second meeting with U.S. independent oil firms to discuss potential involvement”, and “OPEC signals possible deal extension”. Markets are piggy-backing all these headlines to the upside, but the one that is most influential would be the Saudis cutting their November allocations by 560k bpd. The kingdom is restraining not only the production volume but even more importantly exports. Exports are what ultimately shape global inventories and market balances.
Technically, crude has staged a 4% rally from its most recent lows and seems to be on track for the short-term channel-top of $53.36 a barrel over the next 3 -5 days. As the “bullish stars” align, we still must venture into 2018 with uncertainty of continued production cuts, increased U.S. production, and OPEC’s delicate dance of exiting their current production deal. All of which may lead to the re-emergence of oversupply and a renewed rise in crude stocks. But for now, we await a delayed by one day DOE Weekly Petroleum Status report on Thursday for a better indication of what the markets entail for the upcoming weeks. Reuters POLL shows U.S. crude inventories down for a 3rd straight week:
For now we must wait and see which direction the next major headline jolt takes us.