For those curious why oil has soared over 6% as of this moment, here is the one tweet explanation we posted yesterday during the peak pessimism surrounding the OPEC deal:
OPEC hoping more shorts will pile in ahead of tomorrow’s announcement
— zerohedge (@zerohedge) November 29, 2016
Sarcasm aside, the reason why WTI has exploded this morning…
… is because once again optimism has returned that OPEC is close to a deal to reduce supply though final terms still need to be agreed, Saudi Arabian Oil Minister Khalid Al-Falih told reporters at OPEC’s Vienna HQ, adding Riyadh would agree to Iran freezing production at pre-sanctions levels. The comments could be seen as a compromise by Riyadh, which in recent weeks insisted that Iran fully participate in any cut.
Brent crude futures jumped more than 6 percent to nearly $50 a barrel. The Organization of the Petroleum Exporting Countries started a closed-door session at around 1000 GMT (5 a.m. ET) with a news conference scheduled for 1500 GMT.
Falih also said OPEC was focusing on reducing output to a ceiling of 32.5 million barrels per day, or cutting by more than 1 million bpd, and hoped Russia and other non-OPEC members would contribute a cut of another 0.6 million bpd.
Here is a brief summary of all the key highlights and headlines from this morning courtesy of Bloomberg:
- “There are good chances” and the “sticking point” remains distribution of production cuts: Al-Falih says just before group starts its formal meeting
- Iraq’s minister says his country is ready to cut output within the framework of its own interests and hasn’t yet decided its level of cutback
- Venezuela’s minister says he expects Iran, Nigeria, Libya to be exempt from cuts while Iraq expected to cut along with other OPEC members; “we think that $60 is a fair price”
- Oil prices rose earlier Wednesday after Iranian Oil Minister Bijan Zanganeh said he was “optimistic” OPEC is close to a deal, then rallied more on comments from other ministers, with January Brent futures topping $49/bbl.
- Zanganeh also said: “For Iran, no reduction, no freeze. It’s a new arrangement, it’s not a freeze for any country.”
- Prices rallied further, with Brent approaching $50, on comments from Zanganeh that non-OPEC Russia had changed its view and was ready to make an output cut.
- OPEC are now said to be discussing a cut of 1.4mmbpd, up from the initial target of 1.2 mmbpd, with 600kbpd said to come from non-OPEC nations.
- Several ministers, including Nigeria, made positive comments Wednesday morning, suggesting supply deal is still possible, following an a sense of deadlock earlier this week
- Still, Indonesia says issues “not easily resolved”
- Algeria proposed Tuesday that OPEC’s 14 members would cut production to 32.5m b/d from October level of 33.6m b/d, according to 2 delegates familiar
- Under that proposal, Angola will cut from September level because it had some field maintenance in October
- Nigeria, Libya would also be exempted
- Still, OPEC will consider the 2 nations’ output in calculating group target, using YTD averages, not October levels
- Iran has suggested freezing at 3.975m b/d; Saudi Arabia countered with a proposed cap for Iran at 3.707m b/d; Algeria recommended 3.795m b/d
To be sure, Russia already appeared to be backing away from a promise of a 400kbpd cut, saying it would be a bit “excessive.”
Putting the oil move in the context of the Vienna OPEC summit here is a chart showing the price reaction across all recent OPEC negotiations:
AN UPDATE ON THE PRICE ACTION AFTER EACH OF THE MAJOR #OPEC MEETINGS THIS YEAR. #OOTT http://pic.twitter.com/na5eKSh6mX
— Samir (Sam) Madani (@Samir_Madani) November 30, 2016
With headlines coming fast and furious, and the squeeze smashing shorts, we expect oil to rise even more before the final deal is reached.
via http://ift.tt/2gUQZcA Tyler Durden