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Page added on December 8, 2016
Will We See $60 Oil By Christmas?
For the first 11 months of the year, OPEC talked oil prices up, but by December it became clear that oil prices were not going to rise higher on mere promises, and so OPEC announced a deal to cut production in their Algiers meeting on November 30. Crude oil promptly responded by rallying 12% since the announcement of the deal.
Adding to the OPEC production cut of 1.2 million barrels a day, non-OPEC nations verbally agreed to pitch in, proposing a cut of 600,000 bpd. The total reduction achieved on paper was 1.8 million barrels a day.
However, the $52-a-barrel mark for WTI has become an important level. Once it hits $52, the market starts worrying about the fundamentals. This time, it is no different.
OPEC, while agreeing to cut production, has in the past shown questionable commitments to its agreements, which puts a question mark on the implementation of the agreed production cut.
In November, as the meeting was underway for solidifying the details of the production cut, OPEC members back home were busy pumping oil at record levels, reaching a record output of 34.19 million bpd. Similarly, Russia, which has been vocal in support of the production freeze also increased production to 11.21 million bpd, nearly a 30-year high.
Second, Saudi Arabia, which has to do most of the production cutting, has cut its January price for the Arab Light grade for Asian customers by $1.20 versus December, reports CNBC. This shows that Saudi Arabia is worried about its market share, and cutting production is going to make it more difficult to retain its market share.
So when it comes to implementation, big question marks remain.
“Adherence to assigned OPEC quotas is apt to be limited and enforcement of such nearly impossible,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note, reports CNBC.
The U.S. shale oil producers are also a serious threat. They have added 161 oil rigs in 24 of the past 27 weeks, taking the count to 477, highest since January. OPEC will not want to unleash the beast once again, which is now leaner and more competitive than ever.
OPEC is not keen on giving the U.S. shale oil producers an opportunity to increase oil production and thereby increase their market share, exporting to new and existing markets, while OPEC is busy cutting production.
RBN Energy President Rusty Braziel said: “the sweet spot for OPEC is to have crude prices between $55 and $58 a barrel. They want the extra money, but do not want to create the economics to have the U.S. increase production by 100,000 barrels a day,” as quoted by CNBC.
Related: Venezuela’s Maduro Praises The OPEC Deal, But How Good Is It Really?
With its current deal, OPEC ensured only that there is a floor under oil prices, instead of aiming for higher oil prices closer to $60 a barrel.
What does the crude oil chart forecast?
(Click to enlarge)
Crude oil has made a nice ascending triangle pattern. If the price breaks out of the $52 levels and sustains the breakout, it gives an upside pattern target of $67. However, the markets have rejected the levels above $52 on December 5, but we should see one more attempt at a breakout above the highs.
A breakout may see the oil rally to $54 a barrel, where it should again find some resistance. $60 in 2016 looks unlikely.
8 Comments on "Will We See $60 Oil By Christmas?"
shortonoil on Thu, 8th Dec 2016 7:30 am
“Crude oil promptly responded by rallying 12% since the announcement of the deal.”
When the market is over supplied by 5.75 mb/d cutting 1.2 mb/d is just not going to be that effective. The price went up 12% and then went down 12%. It is now 80¢ above where it started before OPEC began its last sale on homogenized snake oil. OilPrice.com seems to be buying it. We wonder were they store it? Maybe they put it with their ever growing inventory of brand new freshly painted bridges?
rockman on Thu, 8th Dec 2016 9:44 am
What’s amazing is how for two years there was a constant clammer about how much oil was going into storage. But now when prices dip up the thought that those who stored oil when prices were low would sell on an increase eludes the media. Those with THE LARGEST CAPACITY to increase oil “production” in a matter of days in not the KSA, Russia, US shale producers, etc. It is the companies that have hundreds of millions of bbls in storage. Particularly true in the US where the world’s largest oil storage facility at Cushing OK. exist. There are millions of bbls stored there that can be sent down the pipelines to Texas refineries in a matter of days. At the same time tankers that have been at sea for weeks with oil already bought are still going to make their delivery to those same refineries.
There is a global oil “producer” with whome OPEC has no agreement that can replace any OPEC production cut before that cut can even begin to take effect. As long as this buffer exists it’s difficult to see how a sustained higher oil price can survive. That oil isn’t being stored for free: every month that passes reduces the profit margin anticipated by those investors.
And one more f*cking time: no oil is being sold at the prices that are put out by the media every day: those are the bid prices for oil futures contracts. Thus when OPEC announces a plan for FUTURE production reductions those bids for oil FUTURES contracts increase. As we just witnessed. And guess what just happened: withdrawal from US storage was more the 2X the anticipated amount. And what immediately happened with the bids for WTI oil FUTURES CONTRACTS? They went down.
Just shocking, I tell you…shocking!!! LOL.
Bob Inget on Thu, 8th Dec 2016 11:11 am
While this story (below) is but nine hours old
it has yet to be digested by coked up traders.
It’s a major victory for Russian President Vladimir Putin.
Russia said on Wednesday it sold a stake in oil giant Rosneft for 10.5 billion euros ($11.3 billion) to Qatar and commodities trader Glencore, confounding expectations that the Kremlin’s standoff with the West would scare off major investors.
The deal, to acquire a 19.5% stake in Rosneft from the Russian state, suggests the lure of taking a share in one of the world’s biggest oil companies outweighs the risks that come with Western sanctions imposed on Russia over the conflict in Ukraine.
It pointed to a possible reassessment by foreign investors of the risks of dealing with Russia, at a time when the election of Donald Trump as U.S. president has heightened expectations of a thaw between Moscow and Washington.
Bob Inget on Thu, 8th Dec 2016 11:39 am
The Don has nominated six militant Islamaphobes
to powerful cabinet positions.
Several issues come to mind.
1) Oil is going into short (er) supply .
2) Beginning 12/15/16 Venezuelan
imports, (to US) will be lower by 250,000 p/d .
3) I’ve noticed, maybe you have too,
we rely on many Islamic nations for oil exports.
Voices emitting from Trump Tower are, to put it bluntly, ‘anti Islamic’.
I’m old enough to recall the OPEC embargo caused by the US taking sides (with Israel) during Suez.
Wars in the ME today are over oil and religion.
Without Islamic or Venezuelan or Ecuadorian oil
I’m betting we hit up SPR 1/21/17
Dredd on Thu, 8th Dec 2016 1:59 pm
An oily, stinky christmass present under the dead tree that was cut dead to celebrate life.
Somebody count something (“99 bbls of poison on the wall, 99 bbls of whacko juice … take 1 down and pass it around … 98 bbls of wacko juice on the wall …”).
Already, two major quakes since I posted this: Is A New Age Of Pressure Upon Us? – 9.
Whoopee … counters gonna count.
Bob Inget on Thu, 8th Dec 2016 2:13 pm
News of another Allie
Wikileaks: Turkish Energy Minister Indirectly Involved In ISIS Oil Trade
By Tsvetana Paraskova – Dec 05, 2016, 5:27 PM CST
Ceyhan oil infrastructure
WikiLeaks published on Monday a searchable archive of nearly 58,000 emails from the private email account of Berat Albayrak – Turkey’s incumbent energy minister and son-in-law of Turkish President Recep Tayyip Erdogan – revealing the influence Albayrak has in Turkey and his correspondence regarding Powertrans, a company implicated in oil imports from ISIS-controlled oil fields.
The emails encompass 16 years between April 2000 and September 23, 2016. A search by the ‘Powertrans’ keyword in the published WikiLeaks emails returns 32 results, including emails sent to Albayrak regarding personnel and salary issues at Powertrans.
Turkey banned oil transportation by road or railway in or out of the country in November 2011, but included a provision in the same bill that it could revoke the ban in specific cases, such as meeting the needs of the military. The Turkish government later gave exclusive privilege to Powertrans for transit of oil, WikiLeaks says.
x
Allegations that Erdogan and members of his family are linked to ISIS oil trade are not new. Last year, almost to the date, opposition lawmaker Eren Erdem said he would soon provide proof of Erdogan’s role in the smuggling of Islamic State oil. Just two weeks later Erdem found himself facing charges of treason.
In October 2014, the U.S. Department of The Treasury published remarks by the then U.S. Under Secretary for Terrorism and Financial Intelligence, David S. Cohen, who is now deputy director at the CIA. Cohen said in 2014:
“According to our information, as of last month, ISIL was selling oil at substantially discounted prices to a variety of middlemen, including some from Turkey, who then transported the oil to be resold. It also appears that some of the oil emanating from territory where ISIL operates has been sold to Kurds in Iraq, and then resold into Turkey.”
By Tsvetana Paraskova for Oilprice.com
Cloggie on Thu, 8th Dec 2016 3:45 pm
Old news Bob:
http://www.zerohedge.com/news/2015-12-26/confessions-isis-soldier-training-took-place-turkey
Confessions Of An ISIS Soldier: “The Training Took Place In Turkey”
http://www.express.co.uk/news/world/629409/Russian-jets-smash-ISIS-oil-tankers-after-spotting-12-000-head-for-Turkish-border
Russian fighter jets smash ISIS oil tankers after spotting 12,000 at Turkish border
https://www.youtube.com/watch?v=oCP9qaGsOGw
ISIS Terrorist: Turkey and Saudi Arabia support us, we love them
penury on Fri, 9th Dec 2016 2:34 pm
The article on Turkey’s role in the transfer of oil for ISIS is over a year old and it wasn’t news then.