In Oil & Companies News 30/09/2016
Today, OPEC agreed that its members must consider capping oil production in late November at the regularly scheduled OPEC meeting. Now may be a good time for investors to consider shorting oil.
The media is announcing this as an “agreement” or “understanding” on an oil freeze. This is not true. It is an agreement or understanding that the discussion about an oil production freeze has to continue and that it may be in OPEC’s interest to reach a freeze agreement in late November. The specifics will be decided by committee at a later date. However, because of the headlines and the typical cursory look at OPEC members’ motivations, speculation drove the price up about 5% this afternoon. This price level could be very tenuous.
Between now and late November the market will see several key data and indicators that will likely show a continued global oil glut. If it does not show a continued oil glut, there definitely will be no freeze. If the expected oil glut continues over the next two months, prices will drop in response to those data.
In other words, the news coming out of OPEC today was celebratory for little reason. Today’s news may be a good sign for the future of oil prices, but in the world of oil speculation, two months is far away.
Source: Forbes
