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Oil looks to Opec for direction: Hansen

Ole Hansen
Head of commodity strategy at Saxo Bank, Ole Hansen, sees oil in a wait-and-see mode ahead of today’s Opec announcement. A surprise re-introduction of a production ceiling may cause a short term blip to the upside but overall the $50 to $51 area continue to offer resistance.
Following the Opec meeting the delayed EIA Weekly Petroleum Status Report will also be watched closely. A 2.5 million-barrel drop is expected but there is some confusion because another report pointed to a rise. Traders will potentially wait for both Opec and the inventory report before taking any major trading decisions.
John Roberti John Roberti
Then the last serious chance to assist the rebalancing could come from Venezuela! Saxo Paris indicated this morning that Venezuela should go broke latest at the end of the year unless political upheaval or revolution which could accelerate the movement! Thus I am a bit surprised when you say that if the US stock decrease by 5 or 4 million barrels then the prices should go up? Could you explain?
John Roberti John Roberti
Dear Ole,
I have a difficult time to understand the fixation of the market on US oil stock! It seems to me that oil stock is the result of domestic production plus imports minus exports and domestic consumption. Only two elements are significant for oil prices that is consumption and production. You indicated last week that consumption had slightly declined and domestic production decreased by 18 BPD which is not significant for the glut situation. The Journal of Montreal indicted this Tuesday that Soconor had called last week 3500 workers back to the plant and was intended to be back in full production this week end. Thus next week, the us imports from Canada should be back to their normal level unless you have other and better information regarding Canada. Also studies are more and more inclined to believe that world consumption will not increase as fast as previously thought.
fxtime fxtime
Oil is a strange price invariably reflects not the here and now supply/demand economics nor even the current elasticity constraints but future (near and far contract) deliverable contracts. Sure we have added fun of large fund managers playing the market also to contend with but may i suggest that the belief on stock holdings and increased supply is the sole factor to this market place may be flawed. We need a control factor such as the dollar index to consider as it does have a strong effect also emerging markets will monitor fx pairing to oil and not just to consumption data as they all know the medium and longer term factors and seasonals at play along with the usual economic cycles. This industry is a colossus that takes time to turn and reflect consumption data due to capex already programmed and working through the systems world wide and host producing countries various levels of dependency. Venezuela is simply leveraged too far onto the oil stream revenue margin.
fxtime fxtime
In short the marketwill seem to re-act strangely due to imperfect market pricing models....oil doesn't correlate well to the classic efficient market pricing theorem :-)


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