OPEC/Saudi 'Promises' Fail To Ignite Momentum in WTI Crude Prices

Tyler Durden's picture

WTI crude remains stuck ominously below $46 despite a full court press jawboning, headline-pumping effort this morning. As oil leaders meet in St.Petersburg, Saudis promised to cut exports further, Nigeria suggested it would limit output (at dramatically higher-than-current production), Russia offered hope that Q3 had "big potential", and OPEC suiggested tighter compliance monitoring (as cheating has picked up in recent months).. but oil just won't budge.

As Bloomberg reports, OPEC and partners meet in St. Petersburg where the Saudi energy minister says he expects deep cut in nation’s August exports.

OPEC/non-OPEC meeting:

  • Saudi Arabia’s Al-Falih says inventory draw-down to accelerate, demand picking up; Saudis to cap exports at 6.6m b/d in August, y/y decline of 1m b/d
  • Joint ministerial committee said to discuss monitoring oil exports along with production figures; Al-Falih says exports have become key metric for financial markets
  • OPEC may need to discuss in November extending cuts: U.A.E.
  • Nigeria to limit output to 1.8m b/d if it can reach that level: Oman
  • Russia’s Novak sees ‘‘big potential’’ for oil markets in 3Q; not opposedto monitoring exports

And this is the result... a quick spike above $46... then fall back.

It is clear that OPEC/NOPEC has lost the market's self-referential confirmation circle ('we buy when you speak'). Simply put, US shale's short-term response cycle to any increase in oil prices means any actions taken by the Saudis to juice the energy market are quickly stifled by resurgent US production.

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NoWayJose's picture

"Simply put, US shale's short-term response cycle to any increase in oil prices means any actions taken by the Saudis to juice the energy market are quickly stifled by resurgent US production."

This is the narrative they want you to hear - but US rig counts and production have been steadily increasing at a gradual level - despite any ups or downs in price. If the author were correct US production would also go down when oil prices fell - that is not the case. Likewise you would see production jump with oil prices - it doesn't.

GodHelpAmerica's picture

Shale is omnipotent-- didn't you hear?

They initially survived the worst so everyone thinks they are outside of economic forces.

The irony is the herd must be culled first or the herd will suffer a gradual, protracted decline where the industry runs out of oil to produce with existing wells. The dramatic decline in capex already ensures future shale production will decrease--the question is do the weakest producers even make it that far as significant debt repayments continue to climb?

HowdyDoody's picture

The Houthis have managed to ignite a Suadi oil facility, striking it with a ballistic missile. This is supposedly in retaliation for Saudi strikes against civilian targets.

https://www.almasdarnews.com/article/houthi-missile-strike-takes-saudi-o...

DoctorFix's picture

Yes production would fall but it lags price enough that it'll take time.  Besides there are too many drilling and lease commitments that would cost more to stop than go forward.  Just because it's been drilled doesn't mean it goes into production.  Not with the thousands of wells already drilled and uncompleted still sitting around.

happyfrog's picture

Every jawbone is now just an opportunity to fade WTI.

Jtrillian's picture

What the Saudi's say and what they do are two different things completely.  Just look at their record esp. when it comes to oil production in recent months.

 

Horse Pizzle's picture

$25/bbl is a fair and natural price for oil.  Let it settle.

LiluDallasMultipass's picture

hows that settling going for you?

silverer's picture

What we are seeing is what happens when the banks run the oil business instead of the oil companies.

Publicus's picture

Oil is the greatest renewable energy source we have. The Earth produces so much of it the price is crashing.

sinbad2's picture

The price is not going to go up, until demand grows.

It's a depression, all the factories are closing, this is what happens in depressions.

LiluDallasMultipass's picture

Standard amateur assumptions made, one of them being that news should instantly filter through the market. good old zero hedge