While reports of a global meeting of crude producers has been confused, there is too much on the line for a meeting not to take place, reports Phil Flynn.
Will they meet? Will they cut? The answer is yes! Forget all of the drama. The pressure is too high for OPEC plus not to cut. While global oil diplomacy is crazier than ever, the truth is that price pressure, but more importantly diplomatic pressure, will force action.
Egos and production wars and talk of global cooperation has created unprecedented volatility against a backdrop of record demand destruction from the Coronavirus. Many expected that oil prices would crash after a delay in the quickly arranged OPEC plus meeting. Yet crude oil did not get hit as hard as some thought, in part because of conflicting reports about progress between the production foes Saudi Arabia and Russia. There were also threats of more pressure from the United States and Canada. Russia says the reason for the meeting postponement was for technical reasons.
Reuters reported that Russian President Vladimir Putin blamed the crash in prices on Saudi Arabia on Friday, prompting a response from Riyadh the following day, disputing Putin's assertions. Russia now is saying that the reason for the meeting postponement was for technical reasons.
Reports say that Russia is ready for cooperation with other oil exporters to stabilize the market even though today's OPEC meeting was delayed until April 9 over the weekend. That caused oil prices to gap lower at the open yet is recovering on reports of oil talk progress and reports that the Coronavirus is showing some signs of peaking in the United States.
Saudi Arabia is getting heat from President Trump and Canada, and that, along with disgust from global leaders about the actions by Saudi Arabia and Russia, may force them to cut production. Not only did President Trump hint at sanctions on Saudi and Russian oil but perhaps a reminder that President Trump, if he chose to, could make buying Russia and Saudi oil as toxic in the world community as buying Iranian or Venezuelan oil.
U.S. and Canadian officials reportedly are discussing blocking oil exports from Saudi Arabia and Russia as they work to take advantage of the deadly Coronavirus and figure ways to line their own pockets. The cartel, along with Russia, has shown the world what they are, not a central bank of oil.
We warned bears that while the fundamental picture for oil was all doom and gloom, the charts were telling a different story. Too many times, you can get sucked into selling into the lows as many try to fall all over themselves about predictions of doomsday's oil pricing. Yet already the fundamental picture is changing. Hopes that the Coronavirus is peaking could start having the market anticipate a demand recovery. Rising price and diplomatic pressure on the OPEC and Russia may force them to act. If they don’t, then they may face diplomatic backlash that could haunt them long after the corona virus has passed.
Trade strategy may be key to ride out the crazy moves that will come with the headlines so keep in touch with our daily analysis. Makes sure you are getting my Daily Trade Levels! Read Phil’s energy report at Price Futures Group. Twitter: @energyphilflynn | Facebook: Phil Flynn
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