We’ve entered the twilight zone in oil, where rumors and financial moves in outer markets are affecting oil and the stocks we’ve accumulated, making trading these markets not only difficult, but dangerous. We’ve got to stay disciplined and focused in this tough market and stay away from some tempting, but ultimately destructive ‘opportunities’.
Oil has put together a strong four day rally, pushing Brent prices above $50 a barrel again. But we must realize where this strong response from oil has come from before we foolishly attempt to leverage that move into good opportunities in oil stocks.
First, another meeting from OPEC and non-OPEC members has been tentatively scheduled for September, to discuss another production cut. Both the Russian oil minister and Saudi sources have floated some positive outcomes might come from these discussions. Khalid Al-Falih has said the Saudis would “take any action to help the market rebalance”, and yet the Saudis have also pushed their production in August to the highest level ever – 10.9m barrels a day. This is the kind of aggressive move ahead of meetings that signals that an agreement is very unlikely, and the Saudis (as well as the Iranians) are continuing their fight for market share, instead of ready to compromise on production limits.
Don’t get me wrong – a reconstitution of OPEC as the global supply gatekeeper is very much in the cards eventually –…