Oil and Gas Market Summary 9/30/16 End The Week On A High Note

Oil Prices Daily

Oil prices daily podcast discusses all of the news, events, and trends influencing oil prices each day.

Be sure to visit today s oil prices daily newsletter for links to all news stories and sources mentioned in this podcast.

---

Links:

Oil Prices Daily Newsletter for 9/30/16

Saudi Arabia gambles it can raise oil prices without losing too much market share: Kemp Reuters

+History shows OPEC production cuts can lead to lower oil prices WSJ

Subscribe to this podcast on iTunes

---

Transcript:

Hello, and welcome to the Oil Prices Daily Podcast. Doug Stetzer here, bringing you your recap of all the latest news, events, and trends influencing oil prices.

Oil Prices Daily is hosted on the EKT Interactive Oil and Gas Podcast Network and sponsored by Oil 101, a free online introduction to the oil and gas industry.

Join over 3500 members of the Oil 101 learning community today at www.ektinteractive.com.

OK, so let’s take a look at what happened today. Friday, September 30th, 2016. November Crude finished the week up 41 cents or .9%, to settle at 48.24.

And of course, the end of a really wild and much-anticipated week as we’ve been talking about this for a few weeks coming in.

We got a surprise out of OPEC on Wednesday with a deal to cut production by a million barrels, and prices responded accordingly, bouncing over 6% from a low around $44 before the announcement was made to where we are today.

Just over $48, and really finding some interesting resistance here around 48.30, on our way, potentially, up towards 50. Just to recap, of course the big deal was announced on Wednesday.

Again, it was also confirmed. At least bullish sentiment was confirmed by a surprise draw in EIA stocks this week as well, so lots of surprises with a couple of days to sleep on it.

The news stories now are less headline-related and more analysis of this deal; mainly looking for all the different ways that it could fall apart; where are the hitches in this thing?

There are plenty. Definitely a lot of analysts raising questions on how this will actually look, or if it will actually ever be implemented when OPEC meets at their regular meeting on November 30 in Vienna.

However, regardless of those stories, and they’re all definitely valid, technically, the market looking really strong here, you have to like how the market settled on the highs.

There was some weakness overnight. In the morning, the market regained its footing, traded higher and settled right at the highs of the day, so the fact that you didn’t see selling coming in and profit-taking coming in at the end of the day on a Friday; traders willing to hold onto their length going into the weekend, shows that there’s starting to be some confidence in this move, I think.

Also, when you get these settlements; these consecutive higher settlements, you start looking at maybe testing some of these key resistance levels, you start getting the technical trend-following, momentum-following players on board as well, which can really start giving this thing legs on a next move up towards $50 , in my opinion.

Getting back to the analysis of the OPEC deal on the news, what I was seeing is, in the newsletter; oilpricesdaily.com, of course, but basically, again, people starting to look at where this thing could fall apart.

And one of the surprising trends coming out, and we did mention this yesterday, but there’s some more headlines on it now, is how Iraq has kind of stepped into this key role as a kingpin in making this deal possible, and that is because they are really raising the biggest stink about it.

You have Saudi Arabia and Iran starting to work together, and Iraq has the potential to be the thorn in the side of this whole thing right now.

There are some stories related to that in the newsletter, but the gist of it is that Iraq wants their quota to be based on their internal numbers.

Where they are saying they are producing, and there is some differentiation between those numbers and 3rd-party reports, such as Argus, that they keep mentioning, and they don’t want OPEC basing their quota levels on where these 3rd parties are saying they’re producing.

So that’s their line in the sand. Is that enough to torpedo this whole deal? Maybe. I think it’s fragile enough that one key player can really create a lot of problems.

As we’ve already mentioned, much of the cuts seem to be falling on Saudi Arabia, so if they want to get into a big argument with Iraq about what their actual production is, maybe that’s a sticking point there.

Another interesting story; of course a big theme is, does it even matter? So we have an OPEC deal; does it matter? One story out of Jack Kemp at Reuters; a writer always worth following, Saudi Arabia gambles it can raise oil prices without losing too much market share.

Now, of course, this has been the theme of the market for OPEC over the last 2 years; deciding to protect market share over prices.

What he’s pointing out right here is that basically, Saudi Arabia is making a gamble that these other countries can’t raise production anyway. They can’t fill in the shoes of Saudi Arabia and steal market share, because they’re already maxed out.

A quote from the story:

“Iran is close to its pre-sanctions productions capacity, and will need significant investment to achieve substantial increases in output. Russia, too, is probably at its limit. Libya is likely to remain a failed state, and Nigeria is struggling to re-establish security in its oil-producing areas. Venezuela remains in the throes of prolonged internal political and economic crisis.”

Basically, Saudi Arabia is saying, Go ahead. Try to get to 4 million barrels a day, Iran. We don’t think you can.

These other countries as well. You want your quota to be at pre-disruption level, fine. We don’t think you can get there.

You know, a very interesting gamble, and then a second story out of Wall Street Journal, saying,

“History shows OPEC production cuts can lead to lower oil prices, and again, this is kind of along the same vein, with a quote from this story stating that in the early 1980s, Saudi Arabia led OPEC, reduced output, other oil-producing nations rushed in to fill the vacuum, ramping up their own production.”

These stories are really at the heart of why Saudi Arabia has behaved the way it has in the last 2 years; protecting market share.

They have learned from the past that if they cut other OPEC members then other non-OPEC members just step in to fill the void. It’s really going to be interesting to see how they are able to negotiate this as they structure the deal in their best conditions that they can for themselves, really, because they are the ones going to be making the most of the cuts here.

That’s the gist of it for today. Trading volume was light, with only around 800,000 futures contracts trading, but while light volume definitely lessens technical significance.

I do feel it was a strong day to end the week strongly and end up above some of the trend lines we’ve been drawing out, and right at some key resistance levels.

So an interesting week, enjoy your weekend, and remember, you can always get our concise recap of all the news and events that are influencing oil prices each day by going to oilpricesdaily.com and signing up for our newsletter.

Of course, you can also subscribe to this podcast on iTunes.

Thanks a lot, thanks for listening this week, have a great weekend, and we will see you next week.

The post Oil and Gas Market Summary 9/30/16 End The Week On A High Note appeared first on EKT Interactive.