Just a few hours after WTI Crude dipped below $50, oil prices wiped out losses and started climbing on Thursday after reports that Russia has conceded that it needs to reduce oil production and join a new Saudi-led OPEC cut to balance the market.
At 10:10 a.m. EDT on Thursday, WTI Crude rallied 2.05 percent at $51.32, while Brent Crude was up 1.35 percent at $59.89.
Earlier in the day WTI Crude had breached the $50 support level for the first time in more than a year, following yet another U.S. crude inventory build that the EIA reported on Wednesday.
Then came out a report by Reuters that Russia has started to concede that it needs to join a new Saudi-led oil production cut, but is still bargaining with its key OPEC partner over how much, how fast, and for how long it would potentially reduce its oil output.
Analysts believe that Russia agreeing to reduce production would be crucial for the OPEC/non-OPEC group to hammer out an agreement to cut. Saudi Arabia’s Energy Minister Khalid al-Falih has already said that while the Saudis are going to do whatever it takes to stabilize the oil market, they can’t and won’t do it alone without a collective decision from the OPEC and non-OPEC deal participants.
Russia is comfortable with oil at around $60, Russian President Vladimir Putin said on Wednesday, a week ahead of the OPEC+ meeting in Vienna and just two days before the G-20 summit in Buenos Aires, at which Putin is expected to meet separately with U.S. President Donald Trump and with Saudi Crown Prince Mohammed bin Salman.
Putin also thanked Saudi Arabia and its Crown Prince for the OPEC-Russia cooperation in managing the oil market.
Putin’s remarks show support for the Saudi prince, while analysts think that the G-20 summit in Argentina may be the more important venue for the OPEC-Russia oil cooperation than next week’s full OPEC+ meeting.
By Tsvetana Paraskova for Oilprice.com
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The double standards of hypocrisy are too thick for you fragile oil bulls: Yesterday's EIA report and Tuesday's API report show builds in Cushing, oil stocks, and distillates but if gasoline stocks report a slight draw, then WTI soars, despite the fact that we have a separate futures product for that, it is called RBOB.
When WTI was over $70/bbl due to "looming sanctions on Iran", Saudi Arabia and Russia both pledged to produce more, amidst record U.S. production. Guess what happened to the price of WTI? It went to $76.90/bbl! So, now that prices are neat $50/bbl and we still have record U.S. production with both the Saudis and Russians ready to cut production, the market's response is to be bullish...how convenient!
This is why I never cared about this large drop in the price of oil: What takes a month or more to decline can be brought all back up within a few days trading by 'algos' (algorithmic trading on behalf of hedge fund managers accounts for approx. 83% of all trades). No other futures product is as easily jawboned by producers and blatantly manipulated by speculators.
Where is the NFA (National Futures Association)? All brokerages trading commodities must pay their membership fee, as well as the exchanges (CBOT, NYMEX, etc.) and they get $0.01 for every contract traded. As I type, the front-month contract of WTI (CLF9, January 2019 delivery) has well over 600k contracts and it is only 11 a.m. Central. That is over $6,000 for 1 month of 1 futures product. The NFA is complacent in this malfeasance as they crave volume as much as 'algos' crave price movement.
Don't forget: Prices on WTI only fell from $76.90 because of record net long positions...once one firm decided to take profits, it is all like falling dominoes as other hedge funds respond electronically to avoid losses on bullish positions. Remove 'algos' from the market and the NFA would lose their minds. In the end, it is the Russians and Saudis who benefit the most. They ultimately control everything and Russia has set the price.