Energy Prospectus

Oil prices briefly dipped to new 12-year lows Thursday, but a fresh hope of potential production cuts helped the commodity regain some of those losses later in the day.

West Texas Intermediate, the U.S. benchmark crude oil, fell 4.5% to $26.21 on Thursday but rebounded above $27 after the Wall Street Journal paraphased a United Arab Emirates Energy Minister as saying that "OPEC members are ready to cooperate on a cut."

The commodity hasn't settled below $26 since May 2003, according to the Oil Price Information Service.

Production cuts at the Organization of the Petroleum Exporting Countries would help ease the global glut of crude oil that has crushed the commodity in recent months and tipped U.S. gasoline prices into a downward spiral.

But rumors of OPEC cuts are not the real thing. Two weeks ago, oil surged briefly after the Russian news agency TASS reported that OPEC and Russia could meet in February to cut production.

That hasn't happened yet.

In fact, OPEC increased production in January by 280,000 barrels per day to 32.6 million, according to an International Energy Agency report released Tuesday.

"A sanctions-free Iran, Saudi Arabia and Iraq all turned up the taps," IEA reported.

Still, any sign that OPEC members are weighing cuts will be welcome news for U.S. energy producers that are swimming in debt. Analysts expect numerous bankruptcies by U.S. oil companies in 2016.

2/3 of the OPEC members are flat broke. The other 1/3 better bring lots of body guards to the next OPEC meeting if they don't cut soon.

If they do cut production, we will see the Mother of all Short Covering Rallies in crude oil.

From Enercom
UAE energy minister said OPEC members ready to cooperate

The price of oil today approached a new low of $26.21 per barrel today, the lowest since May 8, 2003, when it hit $26, before bouncing up on news of a possible production cuts from OPEC. The Wall Street Journal’s Summer Said reported on Twitter that the UAE’s Energy Minister Suhail bin Mohammed al-Mazrouei said the group was ready to make cuts, but saw non-OPEC production falling in the future.

“The positive thing is the current market is forcing everyone not to increase output,” said al-Mazrouei. “I’m optimistic that the balance will happen this year despite the oversupply and stocks overhang.” Non-OPEC supplies are expected to drop up to 800 MBOPD while global demand growth is seen at 1.3 MMBOPD.

CNBC reported that traders rushed to buy bearish crude options, particularly for $25 puts, as concerns over crude oil storage persist. Crude inventories in Cushing hit all-time highs just shy of 65 million barrels last week.

Goldman Sachs said in a note to its clients it expected oil prices to fluctuate between $20 a barrel, at the operational stress level, and $40, at the financial stress level, with significant volatility and no trend until the second half.

International crude oil benchmark Brent gained on news that OPEC were looking to cooperate on an oil production “freeze,” but it appears OPEC members themselves are unwilling to cede market share, even to each other. Iran recently reduced the price of its crude oil to Asia in an attempt to undercut Saudi Arabia in one of the world’s key demand centers.

“There’s a price fight within OPEC for Asian market share, and there are worries that storage capacity is going to be breached,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

ABUJA (Reuters) - The mood inside the Organization of the Petroleum Exporting Countries (OPEC) is shifting from mistrust to a growing consensus that a decision must be reached on how to end the global oil price rout, Nigeria's oil minister told Reuters.

Read: http://finance.yahoo.com/news/opec-memb ... 58017.html