Oil Slides After Saudis Suggest Early End To OPEC Deal

Tyler Durden's picture

Following a brief spike overnight (as China intervened in its equity market), crude prices slipped lower, testing towards a $51 handle after Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year, potentially leaving its aim of clearing a global oil glut unfinished.

As Bloomberg reports, OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. However, ending the deal by mid-year and restoring production would mean the surplus just starts building again, thwarting OPEC’s ambition of whittling down bloated oil inventories.

The Organization of Petroleum Exporting Countries said that draining off a stockpile “overhang” of more than 300 million barrels -- enough to supply China for almost a month -- was the main aim of supply curbs agreed with Russia and other producers. Twenty-four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10.

 

 

If they extend the deal for six months beyond its scheduled expiry in June, that surplus will be entirely eliminated by the end of the year, according to Bloomberg calculations based on data from the International Energy Agency. If they don’t extend the deal, and restore output to previous levels, about two-thirds of that glut will remain in place.

“If the reduction is of such short duration, this will hardly be sufficient to balance the oil market,” said analysts at Commerzbank AG led by Eugen Weinberg in Frankfurt. “In this case the market participants who bet on rising prices will probably withdraw from the market, putting corresponding pressure on prices.”

And that is what we are seeing begin to occur on this illiquid US holiday trading day...

When OPEC announced its original deal in Vienna, the group said it could be extended for another six months to “take into account prevailing market conditions and prospects.” Al-Falih said OPEC will reassess the situation when it meets again and the group’s members have said they’re will to extend the pact if necessary.

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thecondor's picture

I hope. The lower the price, the more they have to pump. The higher the price, the less money they make because they sell less oil.

Joe Davola's picture

"early end"  - the door to the meeting room was barely closed before countries were pumping over their quota

Hell, I'd probably last longer with Olivia Munn than their deals.

robertsgt40's picture

Well, that didn't take long. No honor among thieves? 

I Feel a little Qeasy's picture

Bullshit, giving it away is the stupidest thing they could do, only suits the country fuck-wits in the US. Too high a price does not help them either. There is an optimum price and it's far from $10. Strange that it's simple enough to work that out, but they don't, probably in order to prevent bombing by their 'allies' in the US. Cunts.

Silver Bug's picture

Screw it! The damage to the economy has already been done, now lets benefit from the cheap oil. This is meant to destroy Russia and nothing else. The west is in on this.

 

http://www.goldsilverliberty.com/2017/01/rick-rule-warns-us-will-devalue...

Arnold's picture

Well, that is unexpected news.

(snikker)

Scrubbing Bubblez's picture

Jump, you Mo-slum pig fuckers!

Five Star's picture

On a per capita basis, oil production actually peaked all the way back in 1980. While the market may be short term oversupplied, in a normal growth economy it probably wouldn't be.

http://thesoundingline.com/why-oil-supply-may-be-tighter-than-you-think/

shovelhead's picture

I can hear the wailing of the tar sands operators and their lenders from here.

Ghordius's picture

and I can hear the Russians, from here. this is not the "sweet spot", for them

silverer's picture

Basic laws of economics are just so annoying to the gods of oil.

Arnold's picture

The basic Laws of Economics

have been put on Injured Reserve for the foreseeable future.

HelloSpencer's picture

Come on Tyler, 'Oil Slides' and then showing us a chart where Crude drops from around 53 to 52.20. Really?

roadhazard's picture

raghead clusterfuck.

Two Theives and a Liar's picture

Does anyone really believe these countries aren't full-on pumping? OPEC really doesnt mean anything anymore. Every (oil) well for itself!

MadhyaBharatx's picture

The analysts at shepwave have been nailing oil, gold and equities.

 

here are time stamped charts as proof that they share on their blog and FB pages.

 

https://www.facebook.com/166578775325/photos/a.10153488951800326.1073741827.166578775325/10154415124400326/?type=3&theater 

 

www.shepwave.com/blogs 

MadhyaBharatx's picture

From their facebok page 

https://www.facebook.com/166578775325/photos/a.10153488951800326.1073741827.166578775325/10154415124400326/?type=3&theater

 


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spaceduck's picture

Tyler, may i ask you what charting platform you use?