Oil bounced again briefly today in yet another one day wonder round-trip.
The bounce and decline was related to a meaningless agreement between Saudi Arabia and Russia to Freeze Oil Production.
Catch #1: It’s only a freeze, not a cutback
Catch #2: All the rest of OPEC has to go along
Catch #3: Russia is producing as much as it can, so a freeze by Russia contributes nothing
Mohammad bin Saleh al-Sada, Qatar’s energy minister, said the deal was still contingent on other major producers agreeing to join the freeze, which will probably complicate efforts.
Bijan Zanganeh, Iran’s oil minister, said the country would not give up its share of the market, according Iranian news agency Shana. The country has only just started raising exports following lifting of sanctions last month.
All Hype, No Substance
The Financial Times commented “The deal still marks the first significant supply agreement since Saudi Arabia led the cartel in maintaining production in November 2014.”
Pray tell, how is this non-agreement significant?
The oil price reaction was as one might expect with all hype and no substance.
Oil 30-Minute Chart
There’s yet another one day wonder rally in oil.
Oil Daily Chart
For months on end, no bounce has lasted more than a week.
This time there’s a possible double bottom near 26. Will that hold?
I don’t know, nor does anyone else, but I see no reason to be short oil here.
Barring pending bankruptcies (and there may be lots of them), the oil sector is a reasonable place to be for the long term. How painful things get in the meantime remains to be seen.
Mike “Mish” Shedlock
Jon Sellers said:
Supply is still outpacing demand by over a million barrels a day. And the world’s economy appears to be headed into recession. So freezing production may still be increasing oversupply.
US production will be seeing a significant fall in Q4 (maybe Q3) but Iran will more than offset that.
Panic has not yet set in. But it will. I wouldn’t be short either. The panic moment will be unpredictable. But I wouldn’t be long just yet either.
I just read that the “freeze” will leave the current level of excess production at 2 million bpd. I do not think that included Iran ramping up. Higher oil prices? What a joke. The Financial Times has become the whore of Wall St & crony capitalism.
Tony Bennett said:
“Pray tell, how is this non-agreement significant?”
Could be worse …
“Prolonged discussions over the shape of the negotiating table was finally resolved by the placement of two square tables separated by a round table.”
oh yeah, oil lower and longer than most can imagine.
Reports have it that Saudi troops are in Turkey ready to invade Syria to ‘attack ISIS’ and that Saudi aircraft have been sent to Turkey’s Incirlik air base. Syria (and Russia) have rejected this. So what are Russia and Saudi Arabia even discussing oil for when they are about to go to war?
The military moves are probably bluffs (which won’t work) but I would guess that something else besides oil was discussed at the meeting.
War is the best solution for the oil crisis. The industrial military complex and the oil industry both gain. Governments get to divert attention from domestic problems. All we need now is a spark to set everything in motion. Maybe an assasination like in World War One. My bet is turkey and Russia pulling everyone else into chaos.
Again, Elliott waves were already heading up BEFORE the news was released. Since the January lows, oil has been in a corrective pattern called a “flat”. I have an upside target range of $35-$38 in the next 2-3 weeks before a sell-off to new lows.
www. footcareproducts.com said:
I hope you get this but I just wanted to say since you are on word press you have been a writing machine!! wow a lot of production – may be more material now to write about, who knows. I just wanted to say thanks and I love all the stuff on Chicago – I used to live there so hearing about its’ self-destruction is a sick but edifying vice I have and you do it so well!!
Thanks again Tom
On Tue, Feb 16, 2016 at 2:58 PM, MishTalk wrote:
> mishgea posted: “Oil bounced again briefly in yet another one day wonder > round-trip. The bounce and decline was related to a meaningless agreement > between Saudi Arabia and Russia to Freeze Oil Production. Catch #1: It’s > only a freeze, not a cutback Catch #2: All th” >