Talk is Cheap

By: Daniel Guttman / October 10, 2016

Breaking news is trending over all news platforms this morning that Vladimir Putin announced today that Russia, the world’s largest energy exporter, is ready to join a potential agreement to a cap or even a freeze on crude output. Putin has agreed that said cap or freeze is a “sensible” strategy in order to bring balance to the global supply of crude and stability to its price. Both Brent and WTI have reacted to this news. Brent has hit a one-year high, and WTI is trading well above $50/bbl, trading at $51.30 at press time. However, there still remain plenty of bearish sentiments floating around. Even with Putin’s announcement, one cannot overlook the fact that OPEC’s ability to carry out this proposed production cut is still highly unlikely based upon its previous track record. Additionally, it is evident that several nations are not even considering playing ball. Lastly, here in the U.S., Baker Hughes oil rig count report on Friday showed the 15th consecutive week of increased rigs (+4),  which shows the eagerness and readiness of the U.S. to increase supply.

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OPEC and non-OPEC members want to bring stability to the crude supply worldwide, the hopes of which would raise crude prices. However, many bearish speculators believe this deal is not “deep” enough and will not have the perceived impact. CNBC.com states that Saudi Arabia’s Energy Minister, Khalid al-Falih, went on record at the World Energy Congress in Istanbul saying, “It is a very gentle hand on the wheel, we are not doing anything dramatic.”

In order to change the organic market structure of crude supply and crude prices, it feels as if something dramatic needs to be done.  It seems the closer we get to the November meeting between OPEC and non-OPEC members the less important and impactful the entire “thing” becomes. Saudi Arabia has publicly stated it won’t be dramatic, Libya and Nigeria are already demanding exceptions be made to a deal that has not been done yet, and members Iran and Iraq have caused considerable downward pressure on oil prices by not even attending this week’s Energy Congress in Istanbul, let alone their potential to join a meeting in November. Talk is cheap, and is historically a much cheaper method of influence than putting several stubborn nations in a room and having them compromise to form an agreement.   

Domestically speaking, Hurricane Matthew may have changed its course, but it is still dangerous. As Matthew heads out to sea, eastern North Carolina will continue to see severe rain and flooding throughout Monday and Tuesday. Thousands of people have either been rescued or still need to be, millions are without power, 17 people were left dead across four states, and hundreds of people were killed in the Caribbean. While not nearly as important as the impact Matthew had on human lives, the aftermath of this hurricane will indeed have an impact on the market. Supply disruptions remain unclear, although refined product demand will most likely be sluggish this week and into next as widespread flooding has made travel and transportation either hazardous or non-existent.

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WTI is currently trading at $51.29, up $1.48, RBOB and ULSD are also both trading up $0.0163 and $0.0319, respectively. Heating oil season is upon us. The first frost warning for our area is in effect tonight. 

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Categories: Daily Market Update


Daniel Guttman

Written by

Daniel Guttman

With a background in wholesale and commercial sales as well as pipeline scheduling, Daniel is currently the Manager, Business Development in the Card Access Fuels department. He is tasked to find new and innovative solutions to increase sales opportunities for the sales team while managing and evaluating internal department processes. He assists with day to day personnel management, customer data analysis, as well as the daily Pacific Pride inventory and pricing direction.


Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


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