If you were looking for the commitment to production cuts of the OPEC plus 1 to waver at the meeting in Baku, Azerbaijan, you had better forget about it. In fact, not only did OPEC plus 1 decide to continue to follow through with cuts, they even cancelled their April meeting because they think it would be too early to decide about changing oil output level.
You also had a commitment by Russia to be at full compliance by April and that should not change until the next OPEC plus meeting in June. This comes as U.S. oil producers are still cutting back as rig counts fall to the lowest level since April 2018, and the first four- week consecutive drop since May of 2016, according to Reuters.
The market obviously will tighten and may fall into an undersupplied situation as Venezuelan oil is still off the market and I predict that demand in the U.S., China, And Europe is going to come in better than anticipated. Reuters reported that “The broad coalition implemented cuts in February that achieved about 90% of the amount it agreed to, Saudi Energy Minister Khalid al-Falih said at a press conference following the group’s technical meeting. In March the cuts will be “above 100% easily,” he said, meaning the coalition will hold back slightly more than the 1.2 million daily barrels.”
Russian Energy Minister Alexander Novak said his country is now complying with agreed-upon reductions of 230,000 barrels a day. He said the delays were due to freezing weather conditions.
This comes as U.S. oil production is seeing slight downgrades in the overly optimistic production reports. Drillers cut one oil rig in the week to March 15, bringing the total count down to 833, the lowest since April 2018.
Speculators should look for the possibility of price spikes and should start buying the breaks. Look for option trades as well, and bull oil spreads.
Phil Flynn
As previously demonstrated, until it becomes a Gas company, over time, Senex is superglued to the oil price
