Shame on you! Have you been too quick to judge OPEC? OPEC has taken offense to the crude oil market’s biggest selloff in 9 months. The selloff that started when OPEC failed to map out a plan to cut production with non-OPEC producers caused doubt about OPEC's ability to get a deal done by the end of this month. The market hit a one-month low as traders priced in a "no deal" despite OPEC’s insistence that the deal was moving forward.
OPEC was so upset with the market’s lack of respect they decided to set the record straight with a press release to explain why the market has got them so wrong. OPEC boldly stated that they, “remain deeply optimistic about the possibility that the Algiers agreement will be complemented by precise, decisive action among all producers.”
So, there! I mean, when someone says they are "deeply optimistic about the possibility," how could you have any doubts! OPEC scolded “industry observers” against being “too quick to judge the organization or its members. He then chided them by saying, “we have seen how wildly inaccurate their predictions have been, what many of them have failed to recognize is that OPEC’s great strength is its global reach and its diversity.”
Yet OPEC’s pronouncement that they should be taken seriously fell on deaf ears. The trade has priced in no OPEC deal and the press release did nothing to change that. After Algiers, OPEC showed that they could still have influence on crude oil prices but their failed meeting last weekend seems to have taken away their credibility and therefore, it resulted in a negative impact on prices.
So much for that Saturday restart. As I suspected would happen, the Conical Pipeline report has been delayed until Sunday. Colonial had said they are making progress but want to make sure things are ready to go before they restart.
Bottom line, it was a bad week for oil bulls. The failed OPEC meeting, the biggest crude build in history and a stock market that is getting exceedingly jittery. The fear index hitting recent highs has not helped oil and presidential polls that are tightening is leading to crazy volatility.
Yet, if you look beyond the noise, what we are is in shoulder season. The big increase in supply was offset with the big drawdowns we saw over the last 2 months. Global demand will hit a record high this year and again next year. Once we come out of maintenance, oil should start to rise.