Latest Market Commentary

September 23, 2016 

The comments, statements, and chatter coming from OPEC members and non-members seems to get more confusing every day. The Energy Minister of the country says one thing and the President says another. The reports have been all about a “freeze”, and then I read that the discussion of a “freeze” is not on the agenda of the upcoming informal meeting. Now again today there is the comment that this is an informal meeting not a regular OPEC meeting and production quotas will not be discussed. What? I get more confused as the days pass but despite all that the news seems more favorable today that something will happened to stabilize the market, now what that something maybe is anyone guess. Tomorrow will be a new day and new comments.  Maybe that is the plan, to just totally confuse all of us and create uncertainty. I am still a skeptic and even if they do agree to a “freeze” the market will react but ultimately the proof is in the actual results. Stayed tuned in for weekend of comments and we will see how this look again on Monday. Just a reminder that as of right now the next official OPEC meeting is November 30. The above comments were written early this morning and are still valid but a just release statement has now come out and Saudi Arabia has offered to cuts its crude oil production if Iran agrees to freeze its production at its current level of estimated 3.6 million bpd. Iran has not accepted the offer and so far has said they will not cap output until they reach 4.5 to 5 million bpd. Let the negotiation continue and we will see how all this shakes out next week.

ING commodities strategist, Warren Patterson, said oil prices are seen falling to $40 dollars per barrel as supply returns from Nigeria and Libya. He said oil prices have already factored in as much as 500,000 bpd of additional supply from Nigeria while continuing to disregard Libya’s resumption of production.

PIRA Energy in a recent report is estimating a drawdown in crude oil inventories of 2.85 million barrels to be reported by the EIA next Wednesday. This was supportive to the market in yesterday’s trading. Genscape, another private firm said in their analyst that a build of 213,000 barrels would be reported at Cushing, Ok for the week through September 20th.  The numbers on supplies and exports have seen some discrepancies the last few weeks and the potential for revisions and correction are certainly possible so traders will be keeping an eye out for any changes in the coming weeks.

The market is mixed so far this morning as traders try to digest these recent comments from Saudi Arabia and Iran and position themselves for the weekend and next week’s OPEC gathering.

Tim Danze, MFA Oil Company Hedging Manager