On the Verge
The crude oil market is on the verge of an upside breakout as the oil trade is expecting that at the very least, OPEC plus Russia will continue with production cuts at its joint OPEC/non-OPEC Ministerial Monitoring Committee (JMMC) meeting on Thursday. Those hopes have been inspired by the new Saudi oil minister Prince Abdulaziz bin Salman said he intends to maintain production curbs as part of an agreement with the Organization of the Petroleum Exporting Countries.
The market also expects that he will do more than his predecessor Khalid al-Falih, to try to raise oil prices ahead of the Saudi IPO. Mr. al-Falih's major failing was to not get oil to the price Prince Bin-Salman and his father the king wanted. So if Prince Abdulaziz bin Salman, the first member of a royal family to hold that role, wants to avoid the same fate as Khalid al-Falih, he better start calling Russia with a plan to announce a bigger production cut on Thursday.
In the meantime there are reports that Iraq, the biggest over production cheater in the OPEC cartel, it is now ready to reduce its crude oil production next month. Iraq's oil minister, Thamer Ghadhban, said, “We are committed to the agreement to reduce production.”
Oil is also gearing up for another bullish American Petroleum Institute (API) report. While Hurricane Dorian no doubt will start messing with the data, we are still expecting a pretty sizable draw. Private forecasters are reporting at least 700,000 draw at the Cushing delivery hub in Oklahoma and U.S. oil imports into the Gulf should drop dramatically from last week’s pre-storm surge. We are looking for crude oil supply to fall by 3.0 million barrels and we’re looking for products to fall by 3.0 million barrels as well.
More talk of shale pullbacks and fiscal discipline should lower U.S. shale production expectations. Decline rates are rising and rig counts are falling and are not painting a pretty production outlook. Oil demand drops in the U.S. have not happened and talk of falling global demand looks to be more overstated than understated. Demand in China stays strong and may get stronger with more economic stimulus on the way. OPEC Sec Gen Barkindo: The Oil Market Is Not Being Driven By Fundamentals
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