The Oil “Market”

If you blinked, you might have missed oil’s correction off Friday’s highs. The much vaunted deal between Russia and Saudi Arabia was a flop. As we’ve maintained for the past several weeks:

…supply now exceeds demand by at least 25 million bpd. So, even the 10-15 million cut suggested by Trump would do nothing to erase the massive oversupply but would merely slow the rate at which the excess is building.

This doesn’t mean, however, that oil prices won’t continue to be manipulated.  For years, we’ve seen nonsensical moves which defy most predictions based on supply and demand. This one is no different.

Otherwise, you’d never expect to see CL bounce precisely at the bottom of a channel from its Mar 30 lows.Could it be related to Trump’s tweet (right as the market opened) that the 10mm bpd cut OPEC already announced was supposed to be 20mm?

From OPEC’s press release on Friday:

In view of the current fundamentals and the consensus market perspectives, the Participating Countries agreed to…adjust downwards their overall crude oil production by 10.0 mb/d, starting on 1 May 2020, for an initial period of two months that concludes on 30 June 2020.

Following the two month reduction (from inflated levels, mind you) the amount of the cut actually declines to 8mm bpd for the remainder of the year, then to 6mm bpd for the next 16 months.  Even at 20mm, there is still as much as 15mm bpd too much oil being produced every single day. Trump’s tweet just doesn’t reflect reality…”to put it mildly.”

As we watch stock futures ramp higher into the open for the sixth session in a row, is it any wonder that oil is as manipulated as it is?

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