What Will Happen in January?

By: Mike Dombroski / December 30, 2016

What a move for crude prices in December. WTI prices have risen more than 16% this month to $53.67/bbl today on the heels of the OPEC/non-OPEC production cut deal which will begin in January. However, with prices in December ending sharply higher, many are wary that prices have the potential of falling in January once we begin to get word of OPEC’s output for the month.

Kevin Book, managing director of ClearView Energy Partners, said on CNBC’s Squawk Box today that “historically OPEC always blows past its targets.” Meaning that, they produce more than what its stated quota is. Both OPEC and non-OPEC producers agreed to cut production by 1.758 million barrels per day. Russia agreed to cut 300,000 barrels of this figure and was widely perceived to have cheated its production cut target back in 2001. If we begin to gather information that these cuts will not be achieved in January, crude prices have a lot of room to fall. Keep in mind, prices were trading at $44.48/bbl on November 7th, when traders doubted a production cut agreement would be reached. Therefore, there’s a sizeable gap to the downsize if any of the producers cheat.

Furthermore, the strength in the dollar index could help push prices down. It currently trades at $102.23, up 4.5% since November 7th. Remember, the dollar index and commodity prices are inversely related; as the dollar index goes up, crude becomes more expensive in dollar terms.

In summary, January will be a very important month to determine the price path for the rest of 2017. Yes, 2017, it’s almost here! On that note, on behalf of Guttman Energy, we wish all of you a safe and prosperous New Year!

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Mike Dombroski

Written by

Mike Dombroski


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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