Oil prices are getting a boost after strong U.S. jobs data was released, and the possibility of more stimulus in China after China's July exports fell 4.4 percent and imports declined 12.5 percent. The weak state may give the Fed pause before increasing rates because of the China debacle a year ago after the Fed raised rates in December. It could also force China to add more stimulus at the same time. Yet what also is providing support is talk about OPEC having a special meeting and rumors that they will try to bring back the concept of an oil production freeze.
This is with OPEC leaks! Rumors! Denials! Non-denial denials. Let the games begin. The process started on Friday. The Wall Street Journal reported that OPEC members were leaking that they may try to revive production freeze talks. Soon after we heard reports of denials that anything of the sort was going on. Bloomberg reported that OPEC nations aren’t pushing to revive the aborted April agreement with non-members to freeze oil production, according to two delegates from the group.
Russia’s Energy Minister Alexander Novak said he had not been contacted about a plan and so there was some doubt that a plan was under way. If you remember, the Russian Energy Minister was very angry when the Doha accord failed last April and he felt he was duped into making a trip to Doha because he was under the impression that a deal was done.
When the deal fell apart due to a squabble with Iran and Saudi Arabia, OPEC lost credibility and soon after, oil minister Ali al-Naimi was forced out as oil minister even if it was Prince Salman who was really pulling the strings. Yet despite doubts, there seems to be more movement on bringing the freeze back.
OPEC is now reporting that they will indeed meet “informally” in September at the International Energy Forum biennial conference in Algeria in late September. Energy Minister Alexander Novak is open to it as he was quoted as saying, "If other countries raise the issue of a freeze, we are ready to discuss this." "But the position of Russia is that the prerequisites for this have not yet come to pass, considering that prices are still at a more or less normal level.”
Oil is also trying to asses a build in U.S. oil rigs but also a sharp drop in natural gas rigs. Baker Hughes Inc. reported rigs targeting crude in the U.S. rose by 7 to 381 but natural gas rigs fell by 5 to 81 this week, while miscellaneous rigs were reduced by 1 to 2, bringing the total for oil and gas up by 1 to 464. The drop in gas rigs probably included some reclassification of some rigs and will not bode well for U.S. natural gas output. Even as gas falters because of a current supply surplus, we believe that will get tighter soon.