opec

[mkarpoff]

I just read that opec raised their oil quota. Of course, oil is down. Your recent notes have not been optimistic (or am I imagining things?) Where do you think we now stand post opec's announcement?

[setliff]

quota is just a reflection of reality---no change is result.

[dan_s]

My view of how this oil cycle or "price war" is going to play out is summed up in this video: https://vimeo.com/145236378

Historically, price cycles last ~24 months. We are now in month #18.

Saudi Arabia is now in total control of OPEC. If I were their paid advisor, I would tell them not to cut unless all of the other members of OPEC will agree to make proportionate cuts as well. It appears that is what they will do.

If you watch the ten minute video above, you will see that global supply and demand are going to tighten anyway. By mid-2016 the market should be balanced. The price of any commodity cannot stay below finding & development for very long. U.S. oil production is now declining by over 3 million barrels per month (100,000 barrels per day). The rate of decline will accelerate if oil stays at current levels. It will take AT LEAST $60/BBL to stabilize U.S. oil production.

BTW the refiners see this coming, which is why they are buying and storing all the crude oil they can at these low prices.

[dan_s]

Today's movement in the price of oil is just the normal move for the movement in the U.S. dollar. OPEC meeting seems to have had no impact, as it should since no one was expecting a cut in production. The increase in the overall OPEC quota is just to allow room for their new member, Indonesia.

[mkarpoff]

Gold usually moves inversely to the dollar as well, and it moved up $20. Makes me wonder why it didn't follow oil down, particularly with the impending rate increase. Bizarre.

[dan_s]

Good analysis of OPEC.

http://www.telegraph.co.uk/finance/news ... prise.html