With only 2 days to go before the most anticipated decision from OPEC in recent times in regard to production cuts going forward, the mood has swung from bullish jubilation to bearish despondency. Prior to this week, OPEC extending production cuts for another 9 months was an afterthought. Fast forward to this week and headlines of doubt have surfaced and are starting to gain momentum. Headlines like: “OPEC meeting outcome more uncertain than usual – Goldman Sachs”; “We expect OPEC to extend deal until the middle of next year – Citigroup”; and “If production cut agreement ends in March, an estimated 2.4 million bpd year-over-year increase in world supply – Consultancy Wood Mackenzie”. As of 12:15pm EST, WTI for January delivery is down $0.29 at $57.82, HO is down $0.0105 at $1.94, and RBOB is down $0.0216 at $1.7635.
With prices near two and a half year highs and record net long positions, risks to prices are certainly skewed to the downside if OPEC and other key producers, including Russia, agree to only a 9 month extension with no other changes to production cuts. In addition to that, TransCanada said yesterday it would restart the 590,000 bpd pipeline after getting approval from U.S. regulators. Couple these uncertainties with the hustle and bustle of the holidays, no wonder our mood rings have turned from violet (very happy) to black (tense and nervous). In the meantime, we await tonight’s APIs and tomorrows DOEs. Once again, we must wait and see.