The tally is in for the OPEC+ set of voluntary cuts announced today. If you set aside the Russian and Saudi Arabian cut extensions, the total is 684K barrels per day.
That’s not as much as some were hoping for but it’s surely more than was expected a few weeks ago, before the price of oil began to sink. The oil market initially took a dim view of the cuts but it’s rebounded with WTI crude now up t o $76.81 from $75.05 at the lows. That’s still down about $1 on the day but brent is flat.
The focus now shifts to the demand side, where the numbers were disappointing in Q3 and so far in Q4. China is always tough to figure out but imports have slowed since September. Seasonally this time of year is also messy because of refinery turnarounds and the end of driving season. The hurricane season was also a dud.
The day isn’t over yet but you can see the uncertainty in the crude market in today’s candle.
WTI daily
I think this ultimately resolves higher but the ceiling is certainly lower given the 5 million barrels per day of spare OPEC capacity out there. I struggle to see $100 and $90 might even be tough.
The big question is how much more the US will produce next year. The EIA reported today that September US production was 13.24 million bpd. The rig count has been dropping and that should start to hit in the new year but whether or not that happens might be the next big oil market catalyst because many traders won’t believe it until they see it.
Another potential tailwind for oil would be if the bottom falls out of natural gas prices, which is certainly possible given warm temperature forecasts and over-production. That would lead to shut-ins at gassy wells.