Now that the much heralded OPEC meeting is over everyone wants to know up, down or sideways?
As I was watching CNBC when the announcement came that nothing was decided regarding a freeze or individual country freezes. The WTI went down about 2% within the first few minutes, but mid-afternoon June 2nd WTI was a little above $49.
The fact that there was not a selloff in oil makes me believe a new floor for oil is being established. Support for this pricing are the following pieces of information that I’ve read over the last few days:
- The Nigerian conflict is getting worse. Today, it was reported that two Chevron wells were blown up. A couple of days some pipelines were blown up. Nigerian output was down 800,000 barrels per day before today’s news about Chevron. How many more barrels will be taken off the market remains to be seen.
- ISIS in Libya is certainly curtailing production. This conflict is flying under everyone’s radar, but it is removing barrels from the market
- Iran’s oil and gas infrastructure is in horrible condition. Different articles are commenting that the Iranians cannot increase production as much as they would like everyone to believe they can.
- Saudi production is about at its limit. A number of reports indicate the Saudi’s cannot really increase production much more.
- When does the civil war begin? Schlumberger has pulled out. An article today reported that the Venezuelan oil company cannot pay BP the storage costs for its oil on BP tankers. Stick the fork in they’re just about done!
When you look at these five situations, it’s hard to believe that oil prices will go down much from here.