Commodity Update; Crude Oil – 14 October 2014
OPEC rumours are a game changer for Oil benchmarks if confirmed at November meeting
Crude benchmarks continued to decline last week as doubts grew over whether OPEC would soon take action in order to stave off a prolonged period of price weakness.
Key to the week’s developments has been comments made by Saudi Arabian officials in private meetings. Here, Reuters reported this week that some oil ministers have indicated a willingness to accept prices below $90 per barrel for an extended period.
While there has been no official comments as to the exact reasons behind this there are a number of credible theories that have been mooted.
Perhaps the most likely of these is that Saudi officials are seeking to pressure other OPEC member states into accepting at least some share of any production cuts that do eventually go ahead, given the nation’s history as the “swing producer” that reduces output to support prices each time during periods of weakness.
Another credible theory is that OPEC nations could be seeking to mothball production of US shale oil in order to maintain market share over the longer term. On this note, much of the recent weakness in oil prices has come as a result of rapid production increases in North America, where output reached a multi decade high during the summer of this year.
While it is not yet possible to be sure of OPEC’s strategy; one thing that is near certain is that, with prices already below $90, oil benchmarks are officially in bear market territory. With this and the game changer of OPEC intentions in mind, further price declines cannot be ruled out.
Brent / WTI Overlay / Daily Chart
The contents of this report and the Stockatonia website (https://www.stockatonia.co.uk/) have been prepared to provide general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Please always remember that the value of investments may fall as well as rise. Investing in securities, and any other products associated with them, carries a high degree of risk and may not be suitable for all investors. For advice or guidance related to investing in securities markets, please consult with your own financial adviser.
The information provided by Stockatonia, via both the telephone as well as the Stockatonia websites, is prepared as general information and general information only. As a result, the information in question does not constitute a recommendation to either buy and sell or not to buy and sell, any items or products treated as securities or financial instruments under UK laws and regulations.
To the extent that it is necessary, you agree not to act directly upon any information made available via telephone contact with Stockatonia and its representatives, as well as online contact with Stockatonia and its representatives, without first consulting your own financial adviser or investment adviser.
To the extent that it is permitted under the laws of the United Kingdom, Stockatonia and its representatives can accept no liability whatsoever in relation to losses incurred by clients, prospective clients and members of the public where these losses have arisen out of action, or inaction, which has taken place as a result of any form of contact with Stockatonia or its representatives.
This may be contact carried out by internet-driven media, letters and materials which are sent by post as well as information conveyed by Stockatonia and its representatives via the telephone.