Oil Choppy Ahead Of OPEC Plus

The crude oil world is swinging as the congestion trade continues. The market awaits the OPEC Plus decision that at this point looks like a forgone conclusion as it celebrates the reopening of the Suez Canal. Reports that Russia is favoring an extension of the OPEC cut of 8 million barrels a day seemed to get the market juiced up, giving it a close above recent congestion. Yet now oil is retreating as the market is looking at the reopening of the Suez Canal as some type of watershed bearish event.

The reality is that the market is in a battle to establish a bottom as we head into the high-demand season or give in to the pessimism surrounding permanent demand destruction from the COVID pandemic. There is also news that despite reports that Russia is on board with a rollover of production cuts, Russian Deputy PM Novak said that he has been in contact with his OPEC plus colleagues and so far Russian President Vladimir Putin has had no discussions with Saudi Arabia. There are also concerns about Iran's sale of oil to China. Iran and China are openly challenging the Biden administration to see if they will do something to enforce sanctions. It appears Biden will stand down. Yet in February, OPEC-10 compliance was 124% and non-OPEC was at 94% according to JTC. Now the Saudis are saying they will extend cuts until June according to Amena Bakr which should at some point send oil prices higher. We like buying this break for a long-term move. 

Photo by samuel hanna on Unsplash

Biden's answer to OPEC. Well, you may win the battle but we will win the war with the wind. The Biden administration announced massive wind spending plans that they say will create good-paying, union jobs to replace the jobs they are already losing in the energy space. Biden’s Interior Department Bureau of Ocean Energy Management (BOEM) is announcing a new priority Wind Energy Area in the New York Bight—an area of shallow waters between Long Island and the New Jersey coast—which a recent study from Wood Mackenzie shows can support up to 25,000 development and construction jobs from 2022 to 2030, as well as an additional 7,000 jobs in communities supported by this development. The study indicates the New York Bight lease area also has the potential to support up to 4,000 operations and maintenance jobs annually, and approximately 2,000 community jobs, in the years following. This new Wind Energy Area is adjacent to the greater metropolitan Tri-State area— the largest metropolitan population center in the United States that is home to more than 20 million people and their energy needs. The next step is for BOEM to publish a Proposed Sale Notice, followed by a formal public comment period and a lease sale in late 2021 or early 2022.

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