Oil Soars To 3 Week High On Saudi Production Cut Confusion; Iran Spoils The Party

Tyler Durden's picture

Headline hockey continues in the energy complex as earlier confirmation of a pending OPEC meeting possible in February has seen more color added, via Reuters, that Saudi Arabia made a proposal that OPEC members cut production by a maximum of 5%. There remains confusion however as Bloomberg reports simply that Russian energy minister has said they "may discuss it," as opposed to being a specific proposal.

Reuters seems confident that The House of Saud has backed down and prosposed the cut...

  • RUSSIAN ENERGY MINISTER STATES THAT SAUDI ARABIA MADE A PROPOSAL TO REDUCE OIL OUTPUT BY EACH COUNTRY BY A MAXIMUM OF 5%

But Bloomberg is less confident that this is an actual proposal...

  • RUSSIA'S NOVAK SAYS OPEC MEETING MAY DISCUSS 5% OUTPUT CUT: RIA
  • NOVAK: 5% CUT TALKS MAY INVOLVE ALL OIL PRODUCING NATIONS: RIA
  • NOVAK: OPEC, PRODUCER MEETING WOULD BE MINISTER LEVEL: RIA

And further, Interfax reports that this is nothing new...

  • NOVAK: SAUDI ARABIA 5% OIL CUT PROPOSAL WAS MADE EARLIER: IFX
Crude is surging on the confusion...
Pushing to 3-week highs...
After the initial surge, the talk down continues:
  • DJ RUSSIA ENERGY MINISTER: TOO EARLY TO TALK OF ANY AGREEMENT ON POTENTIAL CUTS- DOW JONES
And finally this:
  • RUSSIA ENERGY MIN: FEB OIL MTG MAY DISCUSS 5% CUT, DJ SAYS
In summary: a story about a Saudi proposal for a 5% cut becomes one where a 5% cut may be discussed.  For now however, the short squeeze has been started and the panicked  covering of shorts is in progress if only for the next few minutes.
 
And now Iran spoils the crude party... IRAN WANTS TO RECOUP OIL MARKET SHARE AND IS A CHALLENGE IN ANY DEAL TO CUT OIL OUTPUT - OPEC SOURCES
Iran wants to recover its position as OPEC's second-largest producer behind Saudi Arabia, which it lost in 2012 to Iraq when sanctions over its nuclear work forced Tehran to cut exports. Now, the recovery of market share is central, sources say.
 
"Because of the international sanctions, we lost 1.1 million barrels per day of our exports. So we have to go back to our share of the market," a source familiar with Iranian thinking said on Thursday.
 
With sanctions lifted this month, Iran says it is increasing its oil output by 500,000 barrels per day (bpd) and boosting exports, a plan that other OPEC sources say makes any global cut agreement harder.
 
"Any deal is difficult to reach," said a non-Iranian OPEC source, who added Iran would need to keep output flat or raise it by, say, 100,000 bpd "since higher prices would mean more revenue without the need to raise production. But I doubt it, really."

Oil is reacting...

 

So no US ally Iran is to blame if there are no production cuts?

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jubber's picture

why would they do this now  just as US producers are blowing up?

kerfuffled's picture
kerfuffled (not verified) jubber Jan 28, 2016 10:17 AM

like US pupept saudi arabia, and USA itself, russia and iran like a higher price too

Kolchak's picture

Oil will continue to drop or stay down until the kahzarian mafia is broken down, anything else you see is just algos desperately trying to stay afloat. The petro dollar days are now numbered in Yuans.

kerfuffled's picture
kerfuffled (not verified) Kolchak Jan 28, 2016 10:24 AM

I wonder why brics people are still in opec at all.

I suspect arabia will break the 5% agreement, and then opec falls apart.

J S Bach's picture

Up .77% per barrel is SOARING!  Down .77% per barrel is CRASHING!  C'mon already.

Kolchak's picture

Most, if not all BRICS, are also now AIIB members which will be set on real asset backing via gold. Arabia is done in my opinion and the only thing that remains is what will be done with them.

Imagine what global economics will look like being backed by hard assets once again and also what that will do to the the fiat dollar as it will no longer be acceptable as a reserve currency backed by nothing.

Times are changing and the FED\Kahzarian mafia, will go like the dinosaur.

oneofthesheeple's picture

WHY? WHY would they cut production just when they are winning? last weeks US domestic production decreased. Russian currency is in the dumps.

Iran would welcome any production cut by the saudis. last i checked iran and saudi werent getting along.

 

new game's picture

what will this 5 percent cut do? any honor amounst thieves? who will oversee? ha...

JRobby's picture

"We are adjusting production amounts in concert with our partners. Please feel free to develop the tools that you would need to attempt to monitor our output. Until then, you will take what we give you and like it."

Herdee's picture

 Iran coming on right now,did Sausi wake up or is it just another con game to add more hedges for the next down side?

Mr.Sono's picture

Dead cat bounce, Iran will cover the 5%

Kolchak's picture

Must be running out of storage tankers to park.

JRobby's picture

That and on shore storage as well.

holdbuysell's picture

Looks like the Saudis are taking one from the jawboning CB playbook.

No need to actually cut when they can jawbone the market higher.

Winston Churchill's picture

Russia has the Saudis balls in a vice, what else will Putin squeeze out of them ?

Revenge is a dish best served cold.

101 years and counting's picture

spiking oil is now bullish.  luckily for central printers, oil crashing $70 was never bearish.  sigh.  how fucking long can this fucking joke last?!?!?!?!?

Bill of Rights's picture

Markets not broke, see everything is as usual..

https://www.tradingview.com/x/ScFbHqA8/

 

NoDebt's picture

Sure, the difference between "proposed" and "discussed" is worth a buck a barrel.  Why not?  They can do whatever they want, so why not do this, too?

SillySalesmanQuestion's picture

They are so desperate for oil to go up, it would go up $20/bbl in two hours if OPEC said they would cut production.

Bangin7GramRocks's picture

Why not "propose" a 50% cut? Oil jumps to $80 and they all get billions for free. It's not like there is any actual reality in the price of oil. Let's go full retard!

roadhazard's picture

If Anyone cuts production the frackers come back. I fucking love it.

herkomilchen's picture

That's the power of competition.  That's why in a free market cartels and monopolies and pricing power can't last because the moment anyone attempts them they create a profit opportunity incentivizing new entrants to arise and shatter them.  Competition, including the threat of it, cures all ills.

sudzee's picture

Things must be bad for the Saudis to be forced into kissing Russian/Iranian ass.

johnnycanuck's picture

Palace coup?   Best not to lose your head in times like these :)

MFL8240's picture

This shit is disgusting!

Polonius's picture

Always waiting and watching for one cartel or another, be it oil or banks or whatever, to announce their desires.  This is one hell of a market system we have here.

Chad_the_short_seller's picture
Chad_the_short_seller (not verified) Jan 28, 2016 10:25 AM

Yea, if they do cut then the frackers survive and WLL is the best long on the planet. 

iggenFlot's picture
iggenFlot (not verified) Jan 28, 2016 10:26 AM

Vlad has received the Western Union care packages that many Zeroes have graciously sent (he especially appreciates the dollars).

madbraz's picture

end of month, just as "investors" are about to get their horrendous monthly statements and players in the futures market are deep in the red...awful economic data unleashes a timely "rumour" that miraculously lifts oil & stocks up and pushes yields vertically up.

 

i'd venture to say that if the NY FED is closed for one day, the market would face the biggest crash in history.

 

 

BorisTheBlade's picture

.

i'd venture to say that if the NY FED is closed for one day, the market would face the biggest crash in history.

You'd probably be right, "market" is on life support from the Fed and would evaporate just as algos tear down any support in abscence of "liquidity provider". It is a complete and utter illusion that market would support today's valuations, more likely it would discount every asset class to real and not imaginary risks, i.e. driving lots of them straight to the very place they collectively belong i.e. much lower or even zero.

Racer's picture

Can't have something like fundamentals interfering with hot air rumours for "market" to soar

E.F. Mutton's picture

"Welcome back my friends, to the show that never ends..." - ELP

johnnycanuck's picture

Besides the obvious price and income incentive, there's storage capacity which appears to be at it's limits. Just the 34 member Countries of the OECD for example "have a near-record of almost 3 billion barrels of oil stockpiled, the International Energy Agency estimates."

 

Shipping companies are being asked to slow down their ships so it takes longer to arrive at their destinations and shippers are charging more to act as floating storage because they can.

 

http://www.bloomberg.com/news/articles/2016-01-28/oil-trade-slows-as-sto...

herkomilchen's picture

Stocks moved upward with oil of course but proportionally less percentagewise than recently.  Says something about the mood with stocks.

yogafan's picture

I think they should cut 100% production.  Infinity money, yay!

TradeClown's picture

Peak oil as forecasted by Goldman... at least in the tankers.

Jason T's picture

well done ZH.  on top of it!

DipshitMiddleClassWhiteKid's picture

hehjehhe

 

now is the time to ADD to your shorts, now cover!

madbraz's picture

wish there was a different planet one could move to...where these corrupt shysters are locked in a hole for life and our kids could grow without "social media", "reality TV" and other imbecilities - not to mention the price to pay for the corruption of "leadership"

 

 

 

 

1stepcloser's picture

Saudi's are trying to cut off short oil heads..

_RRR_'s picture

they cant afford camel food no more, so they cut. big deal ...

amanfromMars's picture

The House of Saud and IMPerial Russians yanking Uncle Sam's chain for Panic Reaction/Great Games Play Action?! 

DontFollowMyAdviceImaDummy's picture

this is a massive headfake on the algorithms that are not programmed to account for the massive flood of crude from Iran that's about the enter the "market"... 

post turtle saver's picture

why are you people here reading this? Tyler(s), why are you posting this? fucking lame ass daily action... "omg wtf bbq, it's hit THREE WEEK HIGHS wooooo woooooo" seriously wtf

no one will give a flying fuck about this action until it gets above $60 bbl and STAYS THERE FOR MORE THAN A YEAR... until then, the true historical band for oil is $18 to $35 a bbl and these prices are the upper side of NORMAL... not news, Not News, N O T   N E W S...

Kolchak's picture

Didn't waste time pounding gold did they, which is interesting in that gold has been edging higher despite the algos indifference, makes me wonder why now?

My bet is on Chinas new AIIB going online and bringing some reality to gold even if slight and slow upward movement.

BitchesBetterRecognize's picture

If the Saudis came up with the proposal- it only means they are hurting so badly to the point of reconsidering their bullshit plot while Russia is pleased to say NO!

shit is getting crazy on the Oil industry and to me is what is going to crack the global economy wide open  

BitchesBetterRecognize's picture

If the Saudis came up with the proposal- it only means they are hurting so badly to the point of reconsidering their bullshit plot while Russia is pleased to say NO!

shit is getting crazy on the Oil industry and to me is what is going to crack the global economy wide open  

Jack Buster's picture

Would this work, if they did cut?  The demand just isn't there.  For example, McDonald's is taking big hits because fewer and fewer people want to eat that sewage.  If they produce 5% less big macs, would that make their stock, and big mac prices go up?  Add to that, every fridge available is already full with them?  

If they were to cut production while demand was high and storage tanks empty, then a spike would be understandable. 

 

Seems like investors are jumping at anything that remotely resembles shorter supply.  

The world is producing more than the world is using.  5% isn't enough.  

 

TRM's picture

Any new agreement would have to be based on trust which is in short supply. The illussion that there is only a 1-2 million BPD excess is nonsense. Everyone in OPEC cheats and the Saudis themselves have said that. So consider this a trial balloon at the real amount (5%).

So we really have at least a 5 million BPD excess and it is climbing as most oil producing countries are in a futile attempt to cover price drop with more production.