OPEC Jawbone Fails - Oil Spike Erased In 24 Minutes

Tyler Durden's picture

Well that did not last long...

*  *  *

The bounce off a $47 handle on Friday in WTI was fading fast again this morning...

following news that money managers cut their bullish Brent and WTI oil bets by 154,871 to a net-long position of 699,209 contracts - the biggest decline on record.

While the drop was large, net longs remain extreme suggesting the long squeeze has more to go...

Which of course OPEC had to try and jawbone away...


More details from the original Reuters note:

OPEC oil producers increasingly favor extending beyond June a pact on reducing crude supply to balance the market, sources within the group said, although Russia and other non-members need to remain part of the initiative.


The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1 for six months, the first reduction in eight years. Russia and other non-OPEC producers agreed to cut half as much.


The deal has lifted oil prices LCOc1, but inventories in industrial nations are rising and higher returns have encouraged U.S. companies to pump more. A growing number of OPEC officials believe it may take longer than six months to reduce stocks.


"An extension is needed to balance the market," an OPEC delegate said. "Any extension of the cut agreement should be with non-OPEC."


OPEC sources told Reuters in February that the group could extend the supply-reduction pact, or even apply deeper cuts from July, if inventories fail to drop to a targeted level.


The group wants stocks in the industrialized world to fall to the average of the past five years. According to the most recent data, for January, inventories of crude and refined products stood 278 million barrels above this level.


Five other OPEC sources said it was increasingly clear that the market needed more than six months to stabilize but added that all producers - in OPEC plus non-members - had to agree.


"The ministers will meet in May to decide, but everyone has to be on board," an OPEC source from a major producer said.


OPEC next meets to decide output policy on May 25 in Vienna. There will also be a gathering in May of OPEC and non-OPEC producers, OPEC Secretary-General Mohammad Barkindo said last month.


"Hard negotiations are on the way," another one of the sources said.

There are several catches:

Russia, the largest of the 11 outside producers working with OPEC, has not publicly said whether it supports extending the supply cut, but is wary about the revival of U.S. shale output due to higher oil prices.  "It's too early to know whether everyone will agree to this," a source from a non-OPEC participant in the deal said, referring to prolonging the output curb.

Despite the potential complication admitted by the OPEC sources that a deal is contingent on getting all OPEC and non-OPEC members, algos were delighted with the initial headline...

... although it is unclear how long the kneejerk move higher will continue.

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Tim Knight from Slope of Hope's picture

Prayers delayed are not prayers denied, towel-heads.

scouzi's picture

Silly me - I thought it was illegal for US companies to even have any discussions with OPEC

Grandad Grumps's picture

Limiting access to energy has been a hallmark of the current regime. However, there is infinite free energy available with the right technology, which has been supressed by (you guessed it). My intuition tells me that the is a better than 50% changce that the technology and past treachery will be revealed in the next coupld of years, possibly by 2018.

Then: Pump THIS! Refine THIS!

A. Boaty's picture

Please tell us more about infinite free energy. I want to get in on the ground floor.

adr's picture

Supposedly you just pull energy from the sky, like harvesting lightning. Tesla supposedly figured it out. Oh and the Ancient Egyptians, if Ancient Aliens are right.

Actually, there probably is a way to pull energy from the Earth's magnetic field, or sucking it from the upper atmosphere with artificial lightning.

Pasadena Phil's picture

Ancient astronaut mumbo jumbo. Space aliens run the world but are keeping this infinite free energy source a secret so they can get rich. Although many of the "elites" could make credible examples for the argument that reptilian space aliens are running things, don't believe it.

Winston Churchill's picture

David Icke seemed so normal when he played cricket.

Yen Cross's picture

 I suggested back in February, that the weekly charts looked retarded.

 Every offer had a bid an offer no matter the price. It was so obvious.

 Now that assclown, that was calling $60bbl is working for Trumph ! [Michael Cohen]

AC_Doctor's picture

Sand Niggz learning from Fed Heads and Smurf Yellen.

Dr. Engali's picture

Should be good for an extra quarter at the pump.

adr's picture

Still waiting for the price to fall $.10, guess it will go up by $.25 to $2.65 instead.

RBOB falls $.10 with a $10 reduction in oil prices and goes up $.20 when oil goes up $5.

adr's picture

Must be nice to buy a whole lot of paper contracts, push an absurd rumor, and then profit immensely off selling the contracts a few minutes after buying them.

How this has anything to do with demand fundamentals is beyond me.

Let me ask again, has the production cut actually happened, or are we still pumping more crude into storage than last year?

Yep, still pumping more. The only places where a cut to previous record high production counts as a real production cut is Wall St and the government.

We cut the budget!!!!!

Really you spent $500 billion more than last year.

Well we said we would spend $700 billion more than last year, so we cut the budget by $200 billion.

BingoBoggins's picture

"How this has anything to do with demand fundamentals is beyond me." Libya ... A horse of a different color?

flaminratzazz's picture

Aaaannnd, it's gone!

BingoBoggins's picture

I can only marvel at such beauty in motion ...

Stan Smith's picture

I've been beating this horse to death,  but more than anything else I cant envision any scenario at all where Iran truthfully and honestly cuts back.    NONE.    With sanctions lifted,  they have more access to money coming in than they have for years,   and for a lot of folks,  maybe longer than they've been alive.

There is no chance in hell they are going to turn their back on that money.   None. 

Now, I get that Iran isnt OPEC,  but because of rivalries simply with OPEC,  if Iran is cheating the numbers,  I can assure you the Saudis are as well.    And if they're doing it,  what about the smaller guys?    You dont think Venezuela needs the $$$?

This and this alone prevents OPEC from really pushing things around... and that doesnt even include the fact that domestically we're pulling it outta the ground like we've not in most of my lifetime.