Buy Oil On The Rumor And Rush To Sell On The Fact | Kitco News
Thursday January 28, 2016 17:53
After rising dramatically early in the day, crude oil prices are about 4.40% higher in late afternoon trading. Allegedly the Russian energy minister said that Saudi Arabia had proposed that oil-producing countries trim output, which would be the first reasonable move to help clear a glut that has depressed prices for about eighteen months.
Prices pared gains amid growing doubts over the premature release of the news of the possible deal to cut production by 5.00%. It seems that news reports asserted that delegates from the Organization of the Petroleum Exporting Countries had not yet heard of any plans for talks and that Saudi Arabia had not proposed cuts.
Russia may be trying to talk prices back up. The tired old bear is starved for cash, after all.
Crude had jumped as much as 8.00% after Russian Energy Minister Alexander Novak spoke of the proposed reductions in output, which would amount to about 500,000 barrels a day of cuts by Russia, one of the largest producers outside OPEC.
An unnamed Saudi official shortly thereafter told the Wall Street Journal the proposal did not in fact come from Saudi Arabia, but Riyadh and its Persian Gulf allies "are ready to cooperate with others" to bring stability to international oil markets.
There are a couple of major stumbling blocks to such a deal.
There are two odd-and-getting-odder bedfellows who have a lot to say about output, stockpiles and pricing, namely the United States and a rejuvenated Iran. (The new Iran of the no-sanctions with its 700K barrels of crude per day is itching to roll it all out as soon as possible.)
Because it often seems unbelievable, we need to remind ourselves that the U.S. has to be reckoned with because it is the world’s largest oil producer with enormous reserves waiting in the ground.
