The Organization of the Petroleum Exporting Countries is getting ready to have a big party in Vienna as they hammer out an extension of the current OPEC agreement. While there has been some last minute negotiating by some players like Iraq, it is likely the deal will be extended by nine months.
Crude oil prices came off the year high after a terror attack in England and as President Donald Trump continues to make history on his Middle East trip. First, President Trump cut a slew of business deals with Saudi Arabia and then he opened the door with a peace plan in Israel when he went to the wailing wall in Jerusalem and held a closed-door meeting with Prime Minister Benjamin Netanyahu and then delivered remarks in a joint press conference.
Get on the OPEC/non-OPEC bandwagon! All other OPEC members are on board for the extension of production cuts leading to speculation that even a bigger cut might be in the works. Saudi Arabia’s energy minister, Khalid A. Al-Falih, said all producers have agreed to extend cuts for another nine months until global supply is back to the five-year average.
Crude oil prices are playing the geopolitical gyration game. Events in Brazil, Iran, Saudi Arabia, Venezuela and the United States have oil prices and traders trying to price in risk in a rapidly changing political world. Calls for impeachments, changing political relationships, elections, OPEC meetings, the list goes on and on.
Crude oil is struggling even after the Energy Information Administration (EIA) reported the sixth drawdown in crude oil in a row and the fact that U.S. oil production dipped for the first time in 13 weeks. The bears argue that while we have seen declines they will have to be much larger to drain off excess supply.
Crude oil initially reacted negatively to the American Petroleum Institute report as it showed a surprising increase in U.S. oil supply. The market was expecting a draw and it hurt current thought that U.S. oil inventories had topped out. Yet, if you look at the Cushing Oklahoma delivery point we saw a larger than expected 882,000 barrel drop in supply. That sent mixed signals as did the oil product numbers.