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.
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.
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.