Let’s take a look at what prices are doing as of 12:30 p.m. EST. Heating oil was weaker this morning, down almost $0.0200 cents, but it has since strengthened, currently up $0.0150. Gasoline experienced the same build up, down early this morning, but currently holding strong, up $0.0175. Crude is creeping around the $50 resistance level that has been much discussed over the past several weeks. It is slightly up $0.18 and sits at $48.00 a barrel. The high today was at $48.28 and the low was a good bit under that, at $47.04.
The market skyrocketed on Wednesday after the long awaited OPEC meeting about a possible production cut. The meeting was over six hours long and OPEC came up with a solution or plan of sorts that would set output levels between 32.5 million barrels a day and 33 million barrels a day. To put that into perspective, in the month of August OPEC produced 33.2 million barrels. This goes to show you that one piece of news can slam the market at any given moment. Since the settle on Tuesday afternoon there has been an 11 cent swing on diesel fuel.
So what’s next? Keep in mind that if there is any plan in place, it’s not going to be implemented until November. We have a month’s worth of rumors, possible pipeline issues, and other market news that could bring this market right back down. The meeting yesterday did have one factor that was a bearish sign. Iraq made a statement after the meeting was over that showed zero trust towards OPEC. According to the Wall Street Journal, the Iraqi oil minister stated that he “doesn’t trust the oil-production numbers that OPEC typically relies on.” This agreement needs to be a group decision and if countries like Iraq are not all aboard with the plan, it can thwart everything.
Check out the chart below, showing the balancing act that would occur if output is evened out.