WTI recently dipped below $50 per barrel for the first time in a month, erasing the strong September rally. It’s no coincidence that after two weeks of price declines, OPEC has tried to talk up the oil market again, hinting that more drastic action could be forthcoming.
Echoing the world’s top central bankers, OPEC’s Secretary General said that the oil cartel might need to take “extraordinary” measures to balance the oil market next year. “There is a growing consensus that, number one, the re-balancing process is underway,” OPEC’s Mohammad Barkindo told reporters on Sunday in New Delhi. “Number two, to sustain this into next year, some extraordinary measures may have to be taken in order to restore this stability on a sustainable basis going forward.”
As always, OPEC is vague on the specifics, but the working assumption is that the group will agree to an extension of the cuts until at least mid-2018, or perhaps even as late as through the end of the year. There’s been some discussion about deeper production cuts, but there aren’t a ton of analysts who see OPEC going that far, despite Barkindo’s cryptic language.
Meanwhile, Saudi Arabia engaged in a bit of its own psy-ops with the oil market on Monday, saying that it was taking “unprecedented” steps to cut its oil exports. Saudi Aramco said it would lower exports by 560,000 bpd next month, “the deepest customer allocation cuts in its history.”
The comments are consistent with the country’s longstanding pattern of trying to jawbone the market when it wants higher prices. Based on Monday’s activity, the effort didn’t work. “The fact that we did not get any significant strength from the Saudi news is rather disheartening for the bulls,” Stephen Schork, an analyst and author of the Schork Report, told the WSJ. “The market is very skeptical of this.”
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