EMEA News
Pre-Vienna Rumour Mill Cranks Up With Freeze Talks Trumpeted Yet Again
Even the most unlikely rumour causes market tremours, as evidenced on Wednesday when Brent settled at $49.72 and U.S. crude futures settled at $49.01after earlier plumbing to $48.65 and $47.75 respectively - following scuttlebutt that the Organization of the Petroleum Exporting Countries (OPEC) will consider a new oil output ceiling at its Vienna meeting on Thursday.
Reuters cited four OPEC sources as saying the cartel would likely consider a production cap during the summit, and this came on the heels of an earlier report from a senior OPEC source that Gulf OPEC members, including Saudi Arabia, may mull over the idea of a renewed coordinated output strategy.
Prior to the rumours, Patrick Dennis, lead economist for Oxford Economics, noted, "The OPEC meeting.....is unlikely to see a change in the policy of maintaining market share; Saudi Arabia can claim its policy has been successful, with oil prices recovering at the same time as non-OPEC oil production has fallen back, leading to a more rapid global market rebalancing than expected."
The Zero Hedge site was not only more outspoken in its reaction to the rumours, it lambasted those who spread them: “Just when you thought the February through April recurring headline nightmare is over, in which an `unnamed source’ repeatedly promised that an OPEC oil output freeze is imminent, it has come back to life just hours ahead of the OPEC meeting.”
Zero Hedge went on to state, “The `sources’ no longer even bother including Russia as being part of the deliberations for one simple reason: Russia will not only not be present in Vienna, but is no longer seeking a freeze in global output because prices have risen close to $50 a barrel without one.
“So while there is nothing new here at all, the algos love it and bid WTI back up to $49.
In what could be the most accurate of all predictions involving the oil market in 2016, Zero Hedge concluded that “Most likely next step: a denial from other `sources’, although probably not before the actual meeting takes place; expect more of this folly until the statement on Thursday.
“And ironically, the idea of a ceiling on production is occurring at near-record levels of output and PMIs worldwide flashing red.”
It's unclear why any mention of a freeze should provoke such excitement, especially when the earlier proposed freeze was met with such resounding criticism, typified by remarks made in March by Julian Lee, oil strategist for Bloomberg First Word: "A freeze would be an empty gesture: none of the countries that intend to take part, with the possible exception of Saudi Arabia, was expected to raise production in any case."
