Scary
Can the deal to cut production come back from the dead and is Donald Trump’s campaign back from the dead? OPEC failed to deliver an agreement to cut production in Vienna but vowed to keep talking. This comes against a backdrop of the shocking re-opening of the FBI investigation of the democratic nominee Hillary Clinton, which rattled markets that were convinced that Mrs. Clinton was a lock for the presidency. The developments have wide ranging implications for oil and the markets in general.
The OPEC secretary general was disappointed because he had hopes that OPEC and non-OPEC nations could solidify a deal ahead of next month’s OPEC meeting. Both Iraq and Iran stymied the deal when they disputed OPEC’s official total for their oil production to gain a higher production quota while asserting that they should not be restrained in their production at all. In fact Bloomberg reported that Iraq came armed with data showing a rare level of detail for its oil production and exports, a week after inviting energy reporters to Baghdad to make a case that the country is pumping more crude than analysts and OPEC acknowledge. Iraq said it pumped more than 4.7 million barrels a day last month, several hundred thousand barrels a day more than oil-industry watchers recognize, per Bloomberg.
So the oil market sold off on Friday as it appeared the negations were going to continue and the odds of a deal may fall apart and non-OPEC members decided to wait until OPEC decided on what they were going to do before making a commitment. Still OPEC and non-OPEC, in a joint statement, said that there were positive developments and that concrete steps were being taken to reach a deal. While the results of the meeting were disappointing, all the key players said that the deal is not dead yet.
Donald Trump’s run for the presidency is not dead yet with the announcement that the FBI is re-opening the Hillary Clinton email investigation and it's already having an impact on the market. We saw gold respond and the Mexican peso fell due to fears that the wall will be built. The dollar fell but rebounded and oil is torn as it is possible that we will see less regulation by a Trump presidency and that could be a boom to high paying energy jobs in the U.S.. We could also see the war against coal cease and increased odds that we will see the Keystone Pipeline approved and that may have a big impact.
Bottom line is that while oil has fallen on the strong dollar and OPEC disappointment, there are still signs that supply is tightening regardless. As oil inventories could start to fall further as refiners come out of maintenance, we are still closer to a low price than a high price regardless of what OPEC does or does not do. So oil may move on the Fed who could set the stage for a December rate hike that the market has pretty much priced in. The dollar may be the biggest thing that drives us in oil today.