Saudi Arabia offered to cut its oil output to January levels, as OPEC members seek ways to stabilize crude prices at talks this week in Algiers.“Saudi Arabia is ready to freeze production at the January level,” Boutarfa said, calling the offer “an interesting step.” Saudi Arabia pumped a record 10.69 million barrels a day in August compared with 10.2 million in January, suggesting the Saudis are willing to cut total output by half a million barrels.
Following yesterday's paradoxical US stock surge catalyzed by a bevy of bad macroeonomic news, the overnight session has seen some good old "risk off" mood which hit European shares as a result of the previously reported $14 billion DOJ claim against Deutsche Bank, which sent Europe's biggest bank tumbling, dragging the banking sector lower, while a continued drop in the price of oil pushed energy companies lower.
After two years of a Saudi-led strategy of all-out pumping, adopted to protect market share against the surge in U.S. shale oil, OPECand Russia are putting cooperation back on the table. As Bloomberg notes, their last attempt to do this - a proposal to freeze output in April - collapsed in acrimonybecause of rivalry between Saudi Arabia and Iran. There may be four potential outcomes from the Algiers talks.
Remember the shale gale and Saudi America? The scale of those outlandish delusions has now dwindled to plays in a few counties in West Texas and southeastern New Mexico. Saudi Permian. It’s a race to the bottom as investors double down on the tight oil companies that can still tell a growth story.
One day after all three US indexes hit record highs for the first time since December 31, 1999, US equity index futures, European stocks and Asian equities are little changed after the Nikkei jumped on the back of a Yen weakness, while China reported disappointing economic data and the PBOC suggested that the flood of new debt is slowing which pushed Chinese stocks higher by 1.6% on hopes of more stimulus.
WTI Crude (Sept) oil futures have contonued their 6-day slide this mornig, pressing back to a $43 handle at 3-month lows. While the seasonality, both price and oil demand, and gasoline glut remain significant overhangs, it appears a bigger driver for now is the rapid unwind of record long speculative positioning in crude markets.
Depending upon whom you speak with, peak oil is either a catastrophe waiting to happen or a far-off concern that has already been solved or will be soon. Frequently, peak oil is referred to as a myth. What you rarely hear is that peak oil is an empirical fact having already occurred in dozens of countries.
OPEC has captured its largest share of the oil market since 1975, which could be seen as a vindication of the cartel’s strategy over the past two years. But it also creates vulnerabilities for the U.S. and others, who are once again increasingly dependent on the Middle East for oil.
The UK EU referendum is suddenly totally dominant in financial markets. The increased focus comes as the leave campaign has gathered steam as 4 polls yesterday afternoon/evening put the 'leave' campaign ahead. As a result of the continued global scramble for safety, German 10Y bunds finally dropped below 0% for the first time ever, while global risk assets are red around the globe.
The fight between the two for supremacy in the Middle East region is unlikely to end anytime soon. Currently, supply outages to the tune of 3.5 million b/d are supporting the oil prices by creating a balance between demand and supply. Once Nigeria, Libya, and Canada resume pumping at their normal levels, the effects of the struggle between Iran and Saudi Arabia will be felt. If both increase production, the world will be awash with oil, pulling prices back to the mid $30/barrel levels.
In what has been another quiet overnight session, which unlike the past two days has not seen steep, illiquid gaps higher in US equity futures (the E-mini was up 3 points and accelerating to the upside as of this writing so there is still ample time for the momentum algos to go berserk), the main event was the price of Brent rising above $50 for the first time since November with WTI rising as high as $49.97.