Agreement may not matter at this point
Storage space is almost out of room for oil everywhere. Even if they cut production right now, they would have at take at least 1 or 2 million of barrels of production off of the market right now to stop storage from completely filling up within a matter of weeks. At that point, whether anyone likes it or not, or anyone agrees to it or not, they will have to cut production since they will have no where to put the stuff. I expect if storage fills up and production is cut because there is no where to put the oil, you will see stories that misinterpret the production cuts as being 'good', when the real story is that it shows how out of wack supply is with demand;i.e. the only reason production starts to get cut is because everyone is pumping as fast as they can to avoid going bankrupt and now there is no place to store the stuff, causing prices to crash in order to sell it at any price to free up storage.
Even with an agreement in place, OPEC members cheat on quotas all the time, so while the quota amounts say production is balanced with demand, inventories continue to pile up and increase because of cheating.
Unless they agree to cut something like 5 million barrels at once, in order to account for everyone cheating a little, I can't see it making any difference.
The only thing the small run up in oil prices is doing is keeping the stock price up and giving people a chance to buy put options with less of a time premium in the price as most of the retail market mistake this for a turn around.
I am still expecting CHK to not make the March 15, 2016 bond redemption at maturity and file Chapter 11. They just eliminated the preferred dividend and that was under $200 million; why would they redeem $500 million in bonds on March 15, 2016 after taking steps to conserve cash by eliminating the preferred dividend? It is not like things are going to get better before the end of the year.
I am expecting the Feb 24, 2016 presentation to be a disaster, with more write offs.
Louis J. Desy Jr.
Disclosure: I own March 18, 2016 $1.00 put options.
