The main reason for oil's torrid surge over the past 2 days is that following yesterday's Russia-Opec "oil production cut" headline fiasco, crude traders - who as we previously reported already had a record net short position - scrambled to cover their exposure on the assumption that where there is oily smoke, there will be fire.
We can now put to rest any speculation that OPEC will proceed with any supply cuts, whether Russia requests it or not, because as the WSJ reported moments ago, not only will OPEC not support a supply cut but it will also not support an emergency OPEC meeting.
BREAKING: Iran won't support a supply cut and won't support an emergency OPEC meeting.— Michael Amon (@michaelkamon) January 29, 2016
Iran Would Not Join Immediate OPEC Production Cut -- Iranian Official— Summer Said (@summer_said) January 29, 2016
Iran opposition to OPEC meeting & production cut would effectively scuttle any effort among OPEC and Non OPEC to pull back output i— Summer Said (@summer_said) January 29, 2016
Iran "won't consider a cut" until its exports have increased by 1.5 million barrels a day over current levels-Official— Summer Said (@summer_said) January 29, 2016
Will oil respond negatively to this headline as it did so positively to yesterday's volley of speculation that sent it surging? Judging by the initial response, the short covering may have ended...
... although it remains unclear if it will undo all gains over the past 24 hours.
Still, remember the Saudis previously warned the oil market is oversupplied by about 3MM B/D, which means that all those fundamentals that ceased to matter this week will be back front and center in the coming hours, if indeed it is Iran's fault this time that OPEC simply is unable to reach an agreement.
As for the Saudis, they are delighted to point a finger at Iran as the culprit for why overproduction will continue, even as it is their ultimate strategy to put shale producers out of business. At least this way, the US energy sector can now blame Tehran instead of Riyadh.