Crude oil prices are getting geared up for the OPEC/Non-OPEC meeting in Vienna, Austria. At this meeting it is widely expected that the players involved will extend cuts throughout the rest of next year, despite some lingering geo-political and shale oil concerns. This meeting comes as oil prices pull back from a two-and-a-half-year high and global supply is tightening.
Business and users of crude oil that did not buy into the lower for longer talk are giving thanks this Thanksgiving for having hedged their oil, gasoline and diesel purchases. Suddenly, the oil glut that many had predicted would last forever has suddenly turned into a very tight market.
After being extremely overbought with a record amount of hedge fund and large speculators long caused a sell-off after a questionable report from the International Energy Agency’s, Traders hoping that the American Petroleum Institute weekly supply report would perhaps add some clarity only added to the confusion. In a major mixed bag of a report, the API reported massive and unexpected 6.513 million barrels increase in weekly supply.
It seems that OPEC and the International Energy Agency live in different worlds when it comes to projecting future energy demand. While OPEC in their monthly report expects to see a larger oil supply deficit in 2018, the International Energy Agency (IEA) sees the appetite and an oil market oversupplied in the first half of 2018.
There is a temptation to attribute the recent rise in oil prices to just the uncertainty of the political purge that we have seen in Saudi Arabia, but if you think that you are missing the larger point.