Early morning trading has been quite volatile today as we stand forty-eight hours away from the OPEC production meeting which is scheduled to take place on Wednesday in Vienna. Much of Friday’s loss has been gained back today as WTI crude is currently up more than 2%. Crude prices, followed by refined product prices, will react heavily to rumors and speculation over the next two days, and will then turn reactionary as an outcome is met. As mentioned last week, several times to be exact, prices will probably not react to fundamentals until this meeting is adjourned.
Hot topics circling the OPEC meeting:
- Saudi Arabia declined to meet with Russia today. This meeting was to persuade Russia to cut production, but Saudi Arabia felt this to be a waste until a formal decision is made by OPEC.
- Iraq still remains optimistic about OPEC and a deal being made.
- Iran still wants to be exempt from production cuts. Their GDP relies very heavily upon the production of oil.
- U.S. oil rig count climbed by 3 last week. According to Goldman Sachs, there has been a 50% increase in rigs here in the U.S. since May of this year.
Regarding a production cut, many analyst are concerned about the details. An interesting article on Bloomberg.com talks about the 2008 financial crisis and how OPEC announced an output reduction to help curb the falling prices of crude oil, but failed to hammer out the details. Likewise, the majority of analysts today do believe a deal will be signed this Wednesday; however, they are worried that the specifics regarding how much each individual OPEC member has to cut production by, and what form of regulation will take place to make sure they are in compliance, will keep this deal from being a good one. Investor skepticism is at an all-time high, much like in 2008, and only time will tell if we are going to $55/bbl or $35/bbl.
At post time, WTI crude is up $1.10 to $47.16, RBOB is up $0.0248 and ULSD is up $0.0457