Investing.com - Here's some advice to OPEC: Save your production cut surprises and announce them in the New Year because the market just doesn't seem to be in the mood to listen right now.
Saudi Arabia plans to curb its oil output by more than it committed in a recent OPEC pact, The Wall Street Journal reported on Thursday, citing documents that revealed the cartel’s efforts to be more transparent about its production since its announcement two weeks ago of a 1.2 million barrels-per-day cut.
Instead of responding positively, oil prices fell in sync with tumbling stocks on Wall Street, hitting 17-month lows. West Texas Intermediate crude lost another 5%, wiping out Wednesday's gains built on a modest U.S. stockpile draw and a Fed hike rate that, if anything, should have driven prices lower.
WTI settled down $2.29, or 4.8%, at $45.88 per barrel, the lowest closing price since July 2017. It rose 2% on Wednesday.
U.K. Brent, the global oil benchmark, settled down $2.89, or nearly 5%, at $54.35 per barrel, its lowest close since September 2017.
With just six trading sessions left for 2018, bears appear to be in ultimate control of the moves in oil, with any positive news regarded as noise or drowned out in the year-end countdown chorus.
"You would think that demand along with a major production cut from OPEC and its co-conspirators the Russians, would have the market fearful of a shortfall of supply in the New Year," wrote Phil Flynn, senior market analyst for energy at The Price Futures Group brokerage in Chicago.
"Yet, the oil market is selling on fears that the good times won’t last and the hope that U.S. shale producers will make up for OPEC production cuts even as their cash flows become more negative and the price drop will cause their losses to surge."
WTI is down 40% from the four-year highs of nearly $77 struck in October and nearly 25% lower on the year. Brent is down 38% from the 2014 high of almost $87 struck two months back and 19% lower on the year.
Some think WTI may break below the $40 support in coming days, citing the thinner trading volumes typical for the holiday season and the heavier reliance at this time of the year on algorithmic trading models that tend to focus on price action, ignoring all other fundamentals.
Others point to a continued surge in U.S., Russian and Saudi production that has overwhelmed any bullish case for oil.