Apples And Oil

Oil prices continue to go on a wild ride as we are reminded that you can’t mix apples and oil. After oil put in an incredible comeback on data that OPEC had significantly lowered production and the Saudis severely cut oil exports, slowing growth fears again thwarted the oil rally. Apple CEO Tim Cook after the close warned that revenue for the current quarter was forecasted at $84 billion, way down from the $90 billion dollar forecast. He said that “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China.”  Or maybe it was partly because the Apple I-phone is getting more expensive, upgrading to a new phone where the features really are not that exciting over the previous phones is no longer a necessity.

The news sent oil back down. Who knew that I-phones ran on oil? Yet it really was the slowdown fears against a massive drop in OPEC production. Oil did pop off key support after a Bloomberg tanker tracker report showed that “observed crude exports from Saudi Arabia fell to 7.253m b/d in December on lower flows to the U.S. and China. That confirmed reports from other private trackers and the drop is very significant. Bloomberg says that if this compares with a 7.717m b/d in November, which was the biggest drop in exports since Bloomberg began tracking shipments at the start of 2017.

Oil saw another boost after Bloomberg reported that OPEC oil production had the biggest monthly drop in 2  years. Bloomberg wrote that OPEC production fell 530,000 barrels a day to 32.6 million a day last month. It’s the sharpest pullback since January 2017, the last cut that the market underestimated.

In 2017 many were skeptical that OPEC and Russia could keep compliance going but they proved them wrong. There should be no doubt that OPEC is prepared to do whatever it takes to stabilize prices, even if it means losing some market share to the shale oil producers.

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