The oil market is rallying today primarily because of a sizable crude oil draw reported by the DOE, a softening dollar, and bullish OPEC comments.
higher oil prices
Commodity and global equity markets got smoked yesterday due to a surge in the U.S. dollar index which was perpetuated by fears of Turkish contagion and a surprise build in crude oil inventories.
Oil prices continue to be range bound until the market bulls or bears take control. As of this morning, there were more bullish than bearish factors which is resulting in green across the board for the moment.
The bulls and bears have been battling it out with some violent intra-day price reversals as of late and today is no exception.
On Saturday OPEC and non-OPEC producers agreed to raise production by 1 million barrels per day (bpd). Perhaps more important than that, they agreed to return to 100% compliance of the previously agreed upon production cuts of 1.8 million bpd. Production was lagging from struggling countries, i.e., Venezuela, Angola and Libya which effectively equated to a production cut of 2.8 million bpd. Most notably, Reuters reports that Venezuela has been pumping more than 500,000 bpd less than its target. So, let’s clear up the math. OPEC and its non-OPEC partners are effectively saying they are going to be ramping up production by 2 million bpd, 1 million to make up for lost compliance and 1 million in additional capacity. How are the markets reacting? The Brent-WTI spread is getting slammed.