Oil prices increase by more than 1%

John Kemp is a Reuters market analyst.

Another question hangs over non-Opec members, specifically Russian Federation, the world’s largest producer of crude, and their willingness to join in an effort to freeze or cut output.

Still, analysts polled by Reuters forecast total USA crude inventories rose 1.1 million barrels last week after a record build in the previous week. The resulting net-long position decreased 13 percent. Oil’s recent sell-off is largely due to skepticism that OPEC will reach their proposed goal of cutting about 700,000 barrels per day of production from August 2016 levels.

Iran has reported its output at 3.85 million bpd in September and said it would only cap its output at 12.7 percent of OPEC’s total ceiling – or 4.2 million bpd.

Ironically, Russia’s waffling between producing at maximum levels and freezing production seems to mirror the Saudi’s waffling of the exact same nature, which has repeatedly committed to a freeze with one side of its mouth, and threatened Iran to boost production until prices collapse with the other.

Russian Federation also signaled for a possible cooperation in the cartel’s proposed production cut deal, although there was no final decision yet. The meeting ended without reaching a deal on quotas for individual members. Last week, they were 23 million barrels higher.

So at the moment, members are engaged in shadow bargaining about allocations, some of which is being played out in the media.

Prices slipped below $44 a barrel on November 4 after Reuters reported that Saudi Arabia threatened to raise output if other members didn’t agree to cuts. “The closer we get to an actual decision on production cuts, the more nervous the market will get”.

Highlighting the increasingly uphill battle to achieve consensus, Opec sources told Reuters last week that Saudi Arabia had warned it could raise output steeply if rival Iran refused to limit supply.

Nigeria and Libya are exempt from the freeze, according to the plan announced in Algiers five weeks ago, but increases in Iraq and the expected return of Angolan production once the Dalia field maintenance is complete will make it harder.

In the short term, it is impossible to say how low oil will go, and the market will rise and fall based on OPEC news.

USA stocks soared on Monday, a day before the election, while the dollar strengthened on news of Clinton’s improved prospects, making greenback-denominated crude more expensive for holders of other currencies. “All oil producers could raise their production if there was no agreement, this is a fact”. For output numbers by country, click on this S&P Global Platts OPEC Production Table. The previous uptrend line being sliced through is a very negative sign, and because of this I believe that it’s only a matter time before the sellers come back every time we do try to show signs of strength.