OPEC plus may be raising production, but "Big Oil" is still cutting back. OPEC plus Russia finally agreed to a 500,000 barrel per day production increase, lowering its cut from 7.7 million barrels per day to 7.2 million barrels per day beginning in January in what Saudi Energy Minister Abdulaziz bin Salman said was a very excruciating, very tiring, very frustrating, OPEC Plus meeting. This comes as Chevron Corp. joined other 'big oil" companies in cutting capital spending and jobs. We may get more oil from OPEC, but we assuredly are getting less oil from U.S. energy companies. That may cheer some in government that feel guilty about American success. Still, they can feel better about themselves if they rejoin the Paris Climate Accord and allow China to pollute at our expense.

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Yet if you like soap operas, there is none better than "As the Cartel Turns”. It had drama backstabbing, pouting, and redemption. It sort of went like this. Saudi Arabia leaves its post as lead, leaving Russia to chair the meeting on their own. It seems that some members, mainly the UAE, suggested to Saudi Arabia that they were tired of them dictating policy to the rest of the cartel, and the Saudis basically said, Ok, you do it. The Saudi oil minister Prince Abdulaziz bin Salman Oil minister stepped down. Still, the UEA did not step up, leaving it to Russian Deputy Prime Minister Alexander Novak to chair the group independently. So Russia is now leading OPEC at least for a day.

As Marketwatch reported, "OPEC+ announced that it reached an agreement to pare current production cuts of 7.7 million barrels per day to 7.2 million barrels per day beginning in January. That essentially raises their collective production by 500,000 barrels a day. The group said it would hold monthly OPEC and non-OPEC ministerial meetings starting in January to "assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 mb/d." 

OPEC+ also extended the amount of time that certain countries can compensate for overproduction. They now have until the end of March 2021 to make up for past production over their allotted quotas. "If cheaters [still] have to compensate, then this production increase will be negligible — just moving barrels around from one producer to another," Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.

The fun part about this is now the global oil market gets a new soap opera episode monthly. The group will gather every month to decide on output policies beyond January with monthly increases not exceeding 500,000 bpd. Will Saudi Arabia come back and lead the meeting! Will the UEA take over co-chair with Russia. Will Russian Deputy Prime Minister Alexander Novak find love and happiness in his new position, and will he miss these OPEC meeting sagas. Tune in next month for another tear-jerking episode of “As The Cartel Turns".

Still, the oil market seems unfazed by the increase. The reality of tightening global oil supply and the global oil glut receding faster than anticipated makes the market more bullish. With vaccines on the horizon and economic data strong and a weak dollar and more monetary stimulus perhaps on the way, the bears are starting to cover. The big lockdown bet by oil bears seems wrong even as Vice President Joe Biden will ask all Americans to wear masks for 90 days. Growing confidence that a working COVID-19 vaccine would be administered before the end of the year has revived demand for the hardest-hit airlines and tourism stocks, according to Reuters, and of course, that also raises oil demand expectations.

U.S. oil production, on the other hand, should fall. The Wall Street Journal reports that, "Chevron Corp. CVX -0.08% said it would cut its annual capital spending budget by 26% next year and sharply through the middle of the decade, as the coronavirus pandemic forces an industrywide reappraisal of fossil-fuel investment. Chevron said it would spend $14 billion next year and no more than $16 billion a year through 2025. It previously said it would spend $19 billion to $22 billion a year through 2024 before the pandemic. 

The reductions by the U.S. oil giant follow those announced this week by rival Exxon Mobil Corp. XOM 0.68%, which on Monday said it was reducing its yearly capital spending by about $5 billion to $10 billion each year through 2025. Exxon, which has lost more than $2.3 billion over the first three quarters of this year, also said it would slash the book value of its assets by up to $20 billion. By some measures, the pandemic hit the energy industry harder than any other major segment of the U.S. economy in 2020.

Oil-and-gas companies collectively lost more market value, on a percentage basis, from the beginning of the year than any other major sector. Dozens of companies sought chapter 11 protection from creditors, while tens of thousands of oil workers have lost their jobs. The sizable spending cuts by Exxon and Chevron this week means that there will be even less work for the oil-field services companies that employ many of the industry's ground-level workers and that oil regions in many parts of the world will see reduced economic activity. 

Winter is over! If you don't believe me, look at the crash in natural gas. The market got hammered as former winter like forecasts for December are changing. It seems like the so-called arctic blast that was supposed to coming this month won't happen. This may reduce the odds of a White Christmas!