The world’s No. 2 oil producer, Saudi Arabia, wants to cut oil production to raise oil prices. And has even actually curtailed production to meet that goal. The world’s No 3 oil producer, Russia, wants (others mostly) to cut oil production to raise prices. And has even promised to cut its own production. (We’ll believe that when we see it.) But none of that matters because the world’s No. 1 oil producer, the United States, has put its foot to the accelerator and is producing at record volumes.
OPEC+ agreed to a surprise new oil supply cut of about 900,000 barrels a day at today’s meeting. But oil prices fell anyway. Turns out that nobody believes that the organization will deliver on its promises. Members including Russia, the United Arab Emirates, Kuwait and Iraq pledged the extra reductions after an online meeting, OPEC said. And Saudi Arabia promised to continue its unilateral 1 million barrel-a-day cut through the first quarter. But, critically, the cuts are voluntary.
I’m hoping for some clarity this week on the market trend after Friday’s wild day. Friday’s intraday moves summed up the uncertainty about the direction of this market.
Please Watch My New YouTube Video: Trend of the Week Which is it? OK Growth in the U.S. or Not Great Growth Globally?
Today’s Trend of the Week is Which is it? OK Growth in the U.S. or Not Great Growth Globally? The U.S. market is rallying and the rally even expand from the narrow nine stocks that have been driving up the indexes. The consensus is the U.S. economy will avoid a recession, the Fed will continue to pause rate hikes, and the U.S. economy as a whole is in decent shape. The problem is that the global economy presents a completely different story with asset values pricing in slowing growth. This shows up most clearly in oil prices, which have been in a downward trend. On June 13, West Texas Intermediate was selling below $70 a barrel, and Brent was down to 74.57. Goldman Sachs has cut its end-of-the-year oil price forecast by about 10%. This cut assumes continued lower demand from China and a supply glut, especially from Russia, as that country produces above agreed-upon caps in an effort to fund its war in Ukraine. If you own oil stocks right now, confirm that the ones in your portfolio can continue to make money at $70 a barrel (at least enough to cover dividends). I’d note the lowest cost source in the United States is in the Permian Basin. Companies like Pioneer National Resources and Devon Energy are focused on production from that region.
The Russian government insists that the country has cut oil output as promised. But all the available numbers day that Russian crude oil is flowing at above levels agreed with OPEC. Of course, it’s hard to tell because Russia has stopped reporting key export figures. Russia restricted oil-output data last year due to its “sensitive” nature. And Russia’s Federal Statistics Service stopped publication of crude and condensate output earlier this year until April 2024, following a government decree. That has left oil industry analysts seeking to extrapolate Russia’s crude exports from data such as seaborne shipments. From that indicator it looks like Russian crude flows to international markets are more than 1.4 million barrels a day higher than they were at the end of last year.
U.S. oil benchmark West Texas Intermediate fell 0.57% today to $71.74 a barrel and international benchmark Brent crude lost 0.46% to $76.31 a barrel. In spite of a big cut in production announced this weekend by Saud Arabia. The voluntary cut of an extra 1 million barrels a day in July will take Saudi production to its lowest level in years.
Just in case there are readers who don’t watch my videos, but do follow my picks. Today, April 5, I added Devon Energy (DVN) to my Jubak Picks, Dividend, and Volatility Portfolios.
Today oil prices and oil stocks are soaring on the bullish case that the surprise OPEC+ production cut will push gasoline to $4 a gallon and oil to $100 a barrel. Not everyone buys the bullish case–at least not after a few days of what these analysts call a knee-jerk reaction. And they’ve got a point
Today the prices of oil and oil stocks have soared. At 11:20 a.m. New York time U.S. crude benchmark West Texas Intermediate was up 5.37% to $79.73 a barrel. International benchmark Brent crude was higher by 5.24% to $84.08 a barrel. Among oil stocks, Pioneer Natural Resources (PXD) was up 3.53%; ExxonMobil (XOM ) was up 5.48%; Chevron (CVX) was up 3.73%; Equinor (EQNR) was up 5.91%; and ConocoPhillips (COP) was up 7.79% The U.S. Oil Fund (USO) was higher by 5.40%.
Sunday’s surprise Saudi supply cut will send oil prices higher and to take a bite (your guess is as good as mine) out of the financial markets. On Sunday, April 2 (thank goodness this wasn’t announced yesterday on April Fool’s Day) OPEC+ announced a surprise oil production cut of more than 1 million barrels a day. The organization had not so long ago promised assurances that it would hold supply steady. Supply was already looking tight for the second half of the year and this round of cuts–led by Saudi Arabia’s, 500,000 barrel-a-day reduction–will send oil prices higher.
Oil prices fell again in February with crude dropping another $2 a barrel on the month. Crude prices really didn’t show much of a trend in February as worries over an economic slowdown caused by higher interest rates battled signs of tighter supply. The reading range for the month was the smallest since July 2021. Signs of increased demand from China and the continued bite of sanctions against Russia point to gains for oil in coming months.