‘Twas the night before Opec and of course the market is none the wiser… As predicted each day comes with another series of ‘meetings’ real or imaginary and off-the-record briefings designed to put us all off the scent. Yesterday, the market having become more positive on Monday about some kind of a deal, reacted badly as spin that Saudi Arabia wasn’t going to play ball got into the market. The apparent real meeting was between the Saudis, Russia, Mexico and Venezuela which is quite a roomful if you know what I mean but not much came out except that ‘the market will stabilise itself eventually’. This was what pushed the market down as it came from the Saudi camp and was deemed to be in the ‘no production cuts’ area of the market.
So what to expect tomorrow? Well, we have had all the range now and as I said recently nothing counts in the run-up to the meeting, its what they say tomorrow that does and even that will need to be verified over the next few months. I would say that there are three meaningful outcomes, firstly that the Saudis decide to go for market share and there are no production cuts at all, in this scenario the oil price has no realistic floor but expect at least ten dollars off the price. Secondly, they maintain existing ‘quotas’ of 30m b/d but say something like they will enforce it vigorously, in that case the oil price will still fall maybe not as much as in scenario one. Thirdly, they decide to take the bull by the horns and say that for 1H 2015 they will stick to 29m b/d in which case there is likely to be a modest rise depending on the wording of the press release. All this on Thanksgiving when oil markets are either closed or worse open but unmanned, as the Cowboys take on the Eagles the wealth of Texas might be about to take a turn for the worse, delicious irony…The duration of the conference will be important, taking a long time will be a bad sign, at the moment there is a press conference slated for 1500 hours GMT so, assuming that goes ahead the market will have a couple of hours in London to digest it. If the decision is already made, and I strongly suspect it has, that conference will give us the result, if not it may be a long weekend as Friday and Saturday may be postponed for prayers, possibly to the God of crude oil.
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