Unveiling OPEC’s Mysterious Moves: Lollipops, Tantrums, and the Unpredictable Oil Market
“If a tree falls in a forest and no one is around to hear it, does it make a sound?” If you were at the OPEC+ meeting last week, you probably weren’t working for Reuters, Bloomberg or the Wall Street Journal. Apparently the leaders of the cartel didn’t want anyone to know what they were discussing or perhaps they didn’t want the reporters going back for seconds of shish kabob. Playing Monty Hall and having people guess what was behind the box or the curtain, Saudi Arabia finally announced it would make another cut to its output in July, reducing their production by 1 million bpd to 9 million bpd. The Saudi Energy Minister referred to the announcement as follows: “This is a Saudi lollipop. We wanted to ice the cake. We always want to add suspense. We don’t want people to try to predict what we do.” Lollipop? LOLLIPOP?? Huh??? If he is trying to compose a hip hop song, Snoop Dog would advise him to keep his day job. It sounds like some folks are getting a little frustrated with their inability to control oil prices, as the market has continued to decline even with the previously announced production cuts. This brand new production cut is supposed to be temporary, so its price impact may be just as fleeting. Perhaps they should scroll through the Reddit Wallstreetbets forums for some insight on how sometimes sentiment can overwhelm fundamentals. Tantrums may get you a rattle, or even a lollipop, now and then, but they can’t control free market prices. Some of this erratic behavior may be spawning some squabbling and dissension among the ranks. If more cuts are coming, it’s going to take a lot of vodka to get Russia to join the party.
Despite continued efforts to put a floor on prices, the domestic producers over here just aren’t buying it. The latest total rig count declined by 15, down to 555 which is where we were a year ago. You can’t increase US production if you’re not drilling. Despite the whipsaw in price sentiment, the contango is starting to eat some creatine and it looks like the one month spread wants to roll on. For folks with oil in tank, perhaps short term extensions might not be a bad idea. Of course, if you’re looking for storage, look no further than The Tank Tiger, or our mytanktiger.com platform, where the search for storage is always free for you to use.
Turning to the stock market, investors were exceedingly delighted by the passage of a debt ceiling bill along with May’s jobs report, which showed U.S. employers adding 339,000 jobs, far greater than expectations. The Nasdaq had another positive week, its sixth in a row. The bipartisan agreement in Congress was a comforting example of how the “Dance of the Legislation” is supposed to work. We teach our children to share and compromise. Perhaps our leaders should follow that example as well.
