From Bloomberg Gadfly:
OPEC's just had it with you short sellers. So it's going to... meet. Don't say you weren't warned.Longtime readers will note the editor of the Bloomberg piece is the same journalist who way back in 2007, in a post about metal wrote:
Oil had another little bounce on Monday after OPEC's president said oil's bear market was temporary -- NB: that's something you kind of have to say if you head OPEC -- and members would hold an informal meeting next month.
The latter, especially, may raise memories of the "freeze," the proposed agreement between OPEC and Russia to cap production that didn't come about but helped tee up the spring rally after the market meltdown at the start of the year. This time, Russia stands aloof and there's only talk of a meeting. Still, OPEC's verbal intervention echoes the start of the year in one interesting way:...
...Speculative net length in WTI crude oil futures and options just fell below the equivalent of 300 million barrels for the first time since March. And the latest move was much more about shorts taking on positions rather than longs simply unwinding.
The summer rally has crumbled as booming gasoline demand has turned out to be less booming than previously thought and oil prices recently fell through a number of technical floors in rapid succession.
While OPEC's president said "the economies of major oil consuming countries are expected to improve which in turn would augment oil demand in the coming quarters," that isn't cut-and-dried. U.S. jobs numbers are good, but GDP data, admittedly more lagged, look less so. Even Sanford C. Bernstein's oil analysts, among the most bullish on a recovery, were warning over the weekend that demand growth may disappoint next year.
Indeed, Monday's statement from OPEC contained this curious phrasing:
The recent decline observed in oil prices and the current market volatility is only temporary. These are more of an outcome resulting from weaker refinery margins, inventory overhang -- particularly of product stocks, timing of Brexit and its impact on the financial futures markets, including that of crude oil.It's true that the glut of crude oil and, more recently, products such as gasoline is crushing margins, thereby setting up a buyers' strike on the part of refiners. Yet these get to the heart of what ails the market, rather than being some sort of quirk....MORE
Alcoa is currently operating the Fjardaal smelter at Reydarfjordur (great band name: Fjardaal Smelter — ed.)And the correlation between headbangers and equity drawdowns: "Hard Rock and a Hard Place", among other things during his time as Markets Editor at the online WSJ.
