Oil Stumbles Back To $50 Handle As Saudi/OPEC Jawboning Fails

Tyler Durden's picture

Oil prices limped higher overnight as desperate jawboning of OPEC production cut deal extensions by the Saudis supported a recovery from yesterday's post-inventories plunge. However, confirming the market's lack of faith in OPEC (and Saudi's ability to hold the deal together), WTI prices are sliding back towards a $50 handle as jawboning half-lives slump.

As The FT reports, oil producers are moving closer towards agreement on extending the Opec-led deal to limit output, Saudi Arabia’s energy minister said on Thursday, as the cartel battles excess stockpiles and a resurgent US shale industry that have weighed on prices. Khalid al-Falih said the deal could be run for another three to six months beyond the end of June. Under the terms of the existing accord, Opec members and countries outside the cartel, including Russia, agreed to cut their output by about 1.8m barrels a day throughout the first half of 2017. A preliminary agreement to extend the deal had been reached by most, but not all, producers, he said.

“Consensus is building, but it is not done yet,” Mr Falih told reporters on the sidelines of an energy industry event in Abu Dhabi. “We are still in consultations.”

But the market is not buying it...


Noitably, as Bloomberg reports, when OPEC and Russia meet next month to assess the impact of their oil cuts they face a surprising outcome: stockpiles are even higher than when they started. Inventories have started to decline, but by the time ministers gather in Vienna on May 25, developed nations still won’t have burned through the big stockpile increase caused by a surge in OPEC output just before the cuts came into force, data from the International Energy Agency indicate. The Organization of Petroleum Exporting Countries has been “hoisted by its own petard” by agreeing in principle to reduce production last September while allowing members to keep boosting sales until the deal took effect on Jan. 1, Citigroup Inc. said. While the group has fully implemented its pledged cuts, that’s being offset by U.S. shale oil producers buoyed by price gains, according to Commerzbank AG.

“Producers unintentionally accelerated activities that would ultimately obstruct, and for a period reverse, the very rebalancing they were trying to accelerate,” said Ed Morse, head of commodities research at Citigroup.

“OPEC is like a magician waving his hands and trying to pull the rabbit out the hat, but still the rabbit isn’t there,” said Eugen Weinberg, Commerzbank’s head of commodities research in Frankfurt. “They’ve done all they can with the production cuts and the effect is close to non-existent.”

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FreeShitter's picture

Going to need war to get this much higher.....rumors, fires, and exploding pipelines just aint cutting it.

Silver Bug's picture

The abundance of oil we are now seeing unleashed has always been there, the illusion of "peak oil" is a farce and now they are weaponizing this against Russia and other competitors. In the end, this will have less and less effect, as we are seeing now.



junction's picture

So what else is new?  Maybe another story about how the Saudis are running out of money.

syzygysus's picture

queue a refinery or pipeline terrorist event.  they'll do anything to keep that price above 50.

adr's picture

How can a story about something that has already been told multiple times that already moved prices up,  still move prices when it is told again? 

Oh yeah, algos don't have brains. 

Every utterance of cut is seen as a new event instead of a continuation of the same one. Just for that ability to act so stupidly should be the reason to ban all HFT and automated trading. 

But it makes the "right" people money. 

Tugg McFancy's picture

Maybe next time don't increase production before cutting.

Be nice if they had regular storage figures from other than the US though. Didn't Iran empty 40 million out of floating storage recently? 

A. Boaty's picture

Globally, we have approximately 1 billion bbl in storage (saw that in WSJ a few weeks ago). The fact that it will take years to work thru oil in storage, somehow, does not enter into most analyses.

LawsofPhysics's picture

Talking about the "price" of oil in the absence of any mechanism for true price disovery is a fool's errand.  The "price" in FRNs will be whatever the fuck the bankers in Jew York want it to be.

Houses Depreciate's picture

That may be true but heres what we know for certain;


Nothing accelerates the economy, creates jobs and raises the standard of living like falling prices to dramatically lower and more affordable levels. Nothing.