WTI Crude Drops Below Key Technical Support After OPEC, Russia Headlines

For the first time since September 2017, WTI Crude has tested the 100-day moving-average and is now down over 10% from its highs 8 days ago after an OPEC committee stressed the need to ensure supplies can meet growing demand, adding to speculation the group will phase out its production cuts.

The 100DMA is holding WTI around $65.28 for now at around two-month lows as Bloomberg reports Saudi Arabia and Russia signaled plans to restore output for the first time since the end of 2016.

Their production cuts have cleared a global inventory surplus and there’s now a growing risk of supply disruptions due to U.S. President Donald Trump’s decision to renew sanctions on Iran and Venezuela’s economic crisis. Crude’s surge last month gave rise to concerns demand may falter, even as rising fuel prices have sparked protests from Brazil to Siberia.

“OPEC and Russia have shown concerns about the impact of the rapid escalation in oil prices on global demand,” Bank of America Corp. analysts said in a note. While governments may intervene to cap fuel prices in emerging markets, “we note the growing risks to consumption arising from higher U.S. interest rates and political turmoil in Europe.

While Saudi Arabian Oil Minister Khalid Al-Falih said scaling back supply caps put in place since early 2017 is “on the table,” most producers weren’t consulted about the proposal to revive supplies.

Comments

shortonoil TGF Texas Mon, 06/04/2018 - 09:17 Permalink

If one takes the time to look at the actual data there never was any production cuts. Saudi Arabia and Russia are producing very close to what they were producing in 2015. The Saudi fields are seeing a steady 3% decline, and only by bring two additional fields (their last) on line have they been able to maintain their present production rate. The present high price of oil is resulting in capital out flows from the emerging markets and into the developed economies. The high price is affecting their balance of payment positions, which is affecting their currencies. Their falling currencies are pushing bond holders out of their positions and into bonds with a higher, safer return. The IMF calculates that the out flow is now about $1 trillion a year. As Emerging economies slow, demand will fall and so also will the price of oil. The Maximum Affordability function states that the equilibrium price is now about $45/ barrel.

http://www.thehillsgroup.org/

In reply to by TGF Texas

MuffDiver69 Mon, 06/04/2018 - 08:52 Permalink

Looking at rig count and Permian they can basically turn the spigot on now. The only constraints are infrastructure with pipelines and dredging of ports. Saudi Arabia and Russia are smart not to choke off demand. If the three of us work in tandem then their is the market.....

Allen Gilmer, Co-Founder and Executive Chairman at DrillingInfo is not a man who minces words, an attribute that has served him well during a long career in the oil and gas industry. When it comes to the Permian Basin in West Texas and the amount of oil and gas resource contained in it, he becomes positively loquacious. 'We should view the Permian Basin as a permanent resource,' he says, 'The Permian is best viewed as a near infinite resource - we will never produce the last drop of economic oil from the Basin.'

No one disputes that the resource in the Permian is huge, but 'infinite' is a big word. I asked him to expand on that concept. 'That is the practical reality with the amount of resource that is in the ground,' he says, .

>The research we've done indicates that we have at least half a trillion barrels in the Permian at reasonable economics, and it could be as high as 2 trillion barrels. That is, as a practical matter, an infinite amount of resource, and it is something that has huge geopolitical consequence for the United States, in a very good way. It has a huge consequence in terms of GDP, and right now it is creating an American energy global ascendancy.'https://seekingalpha.com/amp/article/4100836-peak-oil-energy-abundance-energy-expert-now-says-permian-basin-permanent-near-infinite?__twitter_impression=true

shortonoil Arnold Mon, 06/04/2018 - 10:16 Permalink

India is one of the economies getting hit quit hard by the higher prices. They import 80% of their oil. Here is an article that explains their situation. It is driving inflation higher and driving foreign investment out of the country.

https://oilprice.com/Latest-Energy-News/World-News/Oil-Price-Jump-Chase…

The now artificially maintained higher price will have serious repercussions in the near future. The level of economic manipulation that can be applied is limited by real physical constraints. The full life cycle cost of producing petroleum is now higher than the economy can afford. Of course, without oil there is no economy. Dilemma; or the debt piles up until the whole system breaks. That will occur no later than 2030 when 39% of the world's present GDP will have become devoted to oil production, processing, and distribution.

http://www.thehillsgroup.org/

In reply to by Arnold

1033eruth Mon, 06/04/2018 - 15:00 Permalink

What are the odds that price of oil would go straight up all the way to Memorial Weekend and then we get a headline that says SA and Russia might pump more?  

It seems like it was all planned just for our consumption patterns.  Then they decided to let off on the thumbscrews.  What are the odds I ask?  The timing is absolutely uncanny.