Goldman's Damien Courvalin seems to have perfecvtly summed things up - the market was pricing in an OPEC production cut extension of 6-9 months (accounting for around a $2.50 premium in the price). Today's jawboning from Russia seems to signal April discussions (so a 6-month extension) which is a disappointment - and so WTI prices are tumbling...
Sell the leaked, jawboned news?
As we previously wrote, in conclusion, Goldman believes that oil prices have overshot fundamentals and that price risks are skewed to the downside into Thursday’s meeting.
With prices $6/bbl above our forecasts, however, we see risks that even a mildly disappointing outcome could initially keep prices above our $58/bbl Brent forecast. Yet, if the threat of geopolitical tensions fails to materialize in new disruptions, we believe that prices will trade lower in coming months: first the estimated $3/bbl current geopolitical risk premium will not be sustainable and second, we believe that prices have already overshot the industry’s marginal cost of production. In fact, the longer prices remain at current levels in the absence of new disruptions, the greater the downside risks to our 2019 $58/bbl Brent forecast: first from higher non-OPEC supply and second from the realization by OPEC that their cuts or rhetoric have overshot, leading to a potentially more aggressive ramp up in production to not lose market share and revenues.
OPEC meeting timeline: On Wednesday, November 29, the five-country Joint Ministerial Monitoring Committee - composed of Russia, Venezuela, Algeria, Oman and chaired by Kuwait - will meet at the OPEC Secretariat, where it will assess compliance with the deal, review market conditions, and possibly draft recommendations on the future of the cut agreement. The OPEC+ meeting will take place on Thursday November 30, with a closed session of OPEC ministers and the secretary general starting at noon local time (11 GMT and 6 am ET), according to the agenda posted on OPEC's website. If the meeting lasts for three hours as currently planned, it would be followed by the combined meeting of OPEC and non-OPEC ministers and delegates at 3 pm local time (1400 GMT, 9 am ET). After that, there will be a news conference. OPEC has invited 20 additional countries beyond the current 24-country coalition to the meeting, including Norway, Brazil, Colombia, Ghana, D.R. Congo, Egypt, Indonesia, Chad, Cameroon, Republic of the Congo, Niger, Mauritania, Cote d’Ivoire, Turkmenistan and Uzbekistan (Norway, Brazil and Colombia have declined the invitation).