USO
Don't write off any surprises at today's OPEC+ meeting
- Oil prices are on the rise for a second straight session following
reports that OPEC and its non-OPEC partners, an energy alliance referred
to
as OPEC+, might decide against increasing output at a key meeting today.
Until now, the consensus view among the group appeared to be that the
market can absorb extra barrels, given the increased demand from economic
reopenings and recent resilience of crude prices. Oil has even tracked
back
to the $60/level in large part due to the alliance's cutbacks, as well
as a
broader vaccine rollout and increased popularity of commodities as a
hedge
against inflation. Crude futures +0.4% to $61.50/bbl.
- *Backdrop:* OPEC+ initially agreed to cut oil production by a record
of 9.7M barrels per day in 2020, before easing cuts to 7.7M and
eventually
7.2M from January (about 7% of global supply). At that meeting, a clash
ensued, triggering Saudi Arabia to unilaterally slash 1M barrels per day
in
production in February and March, while Russia and Kazakhstan said they
would increase their output by a combined 75,000 bpd.
- Riyadh painted the decision as some kind of leadership position,
saying it was a sovereign political move to support the Saudi economy,
members of the OPEC+ group, as well as the wider industry. However,
OPEC's
de facto leader may still want to return those 1M barrels to market,
while
others, like non-OPEC leader Russia, were also thought to have wanted a
500K bpd collective increase for April. Remember, the breakeven price for
Russia's budget is much lower than that of Saudi Arabia and questions
remain over exactly how much output will be affected and which countries
will be involved.
- *Go deeper:* Some surprises may also be in the making. Last month,
Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman reportedly
said
to those trying to forecast next move from OPEC+: "Don't try to predict
the
unpredictable." The recent energy crisis in Texas, as well subsequent
halt
of gas exports, also led Abdulaziz to consider reversing production
cuts, though he left oil watchers on edge. "We are in a much better place
than we were a year ago, but I must warn, once again, against
complacency.
The uncertainty is very high, and we have to be extremely cautious."
- ETFs: USO, UCO, BNO, SCO, USL, DBO, USOI, NRGU, OILK, NRGD, OLEM, USAI,
NRGO, NRGZ, YGRN
|Today, 4:35 AM
Don't write off any surprises at today's OPEC+ meeting
- Oil prices are on the rise for a second straight session following
reports that OPEC and its non-OPEC partners, an energy alliance referred
to
as OPEC+, might decide against increasing output at a key meeting today.
Until now, the consensus view among the group appeared to be that the
market can absorb extra barrels, given the increased demand from economic
reopenings and recent resilience of crude prices. Oil has even tracked
back
to the $60/level in large part due to the alliance's cutbacks, as well
as a
broader vaccine rollout and increased popularity of commodities as a
hedge
against inflation. Crude futures +0.4% to $61.50/bbl.
- *Backdrop:* OPEC+ initially agreed to cut oil production by a record
of 9.7M barrels per day in 2020, before easing cuts to 7.7M and
eventually
7.2M from January (about 7% of global supply). At that meeting, a clash
ensued, triggering Saudi Arabia to unilaterally slash 1M barrels per day
in
production in February and March, while Russia and Kazakhstan said they
would increase their output by a combined 75,000 bpd.
- Riyadh painted the decision as some kind of leadership position,
saying it was a sovereign political move to support the Saudi economy,
members of the OPEC+ group, as well as the wider industry. However,
OPEC's
de facto leader may still want to return those 1M barrels to market,
while
others, like non-OPEC leader Russia, were also thought to have wanted a
500K bpd collective increase for April. Remember, the breakeven price for
Russia's budget is much lower than that of Saudi Arabia and questions
remain over exactly how much output will be affected and which countries
will be involved.
- *Go deeper:* Some surprises may also be in the making. Last month,
Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman reportedly
said
to those trying to forecast next move from OPEC+: "Don't try to predict
the
unpredictable." The recent energy crisis in Texas, as well subsequent
halt
of gas exports, also led Abdulaziz to consider reversing production
cuts, though he left oil watchers on edge. "We are in a much better place
than we were a year ago, but I must warn, once again, against
complacency.
The uncertainty is very high, and we have to be extremely cautious."
- ETFs: USO, UCO, BNO, SCO, USL, DBO, USOI, NRGU, OILK, NRGD, OLEM, USAI,
NRGO, NRGZ, YGRN
|Today, 4:35 AM
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