Oil Price - Dec 13

[dan_s]

Oil prices skyrocketed yet again at the start of this week on news that non-OPEC countries agreed to cut production. Russia agreed to cut 300,000 barrels per day as expected, and a handful of other non-OPEC countries all chipped in an additional 258,000 bpd in reductions:

• Mexico -100,000 bpd
• Azerbaijan -35,000 bpd
• Oman -40,000 bpd
• Kazakhstan -20,000 bpd
• Malaysia -20,000 bpd
• And the remainder will come from Bahrain, Brunei, Equatorial Guinea, Sudan and South Sudan.

Oil prices jump. WTI and Brent surged more than 3 percent on Monday, taking prices up to $53 and $56 per barrel, respectively. Those prices are the highest in a year and a half.

Saudi Arabia could cut deeper. Saudi energy minister Khalid al-Falih said over the weekend that his country would be prepared to take production below its promised 10 million barrels per day in an effort to cut into global supplies and ensure that the deal works. "I can tell you with absolute certainty that effective Jan. 1 we’re going to cut and cut substantially to be below the level that we have committed to on Nov. 30," he told reporters after meeting with non-OPEC countries. The comments indicate a level of seriousness on behalf of Saudi Arabia not seen in more than two years – for Saudi Arabia to go beyond what it promised in Vienna is hugely positive for crude oil prices. It also suggests that despite fears over non-compliance and cheating, OPEC might actually deliver.

Hedge funds build up bullish position on oil. The liquidation of short bets following the OPEC deal continues. Reuters reports that hedge funds and other money managers have established the most bullish position on record, adding 94 million barrels of long positions and cutting WTI and Brent futures and options short positions by 134 million barrels. The net-long position stood at 728 million barrels, according to the most recent data, the most bullish on record. It is not a coincidence that this has occurred at a time when oil prices have rallied more than 20 percent.

[mkarpoff]

...but our stocks did not do much, if anything.