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Traders Skeptical about Major Oil Producers’ Meeting

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Nov. 20 2020, Updated 3:29 p.m. ET

Major oil producers’ meeting  

OPEC (Organization of the Petroleum Exporting Counties) producers will be meeting at an energy forum in Algeria September 26–28, 2016. Crude oil prices were up by 12% in August 2016, partially due to speculation about the oil producers’ meeting, which could result in an output cap. US crude oil prices are also up by 4% so far in September 2016 as of September 5.

Iran, Saudi Arabia, and Russia’s comments early in August suggest that major oil producers are trying to support oil prices.

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Russia 

On September 2, 2016, Russia’s Prime Minister reported that Russia would support any initiatives by OPEC to support oil prices. These comments supported crude oil prices on September 2, 2016. For more on crude oil prices, read part one of this series. Also, read How the US Could Be the Next Saudi Arabia of the Crude Oil Market. 

Iran and Iraq

On September 3, 2016, the Iranian oil ministry stressed that it would support the oil producers’ meeting after it achieved pre-sanction levels of four MMbpd (million barrels per day). Iran is the third-largest crude oil producer among OPEC countries. Iran produced 3.6 MMbpd of crude oil in July 2016. It exported more than two MMbpd of crude oil in June 2016, according to data from the Joint Organizations Data Initiative. Iraq’s Prime Minister, Haider al-Abadi, also said that the country would support the meeting.

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Saudi Arabia

On August 25, 2016, Saudi Arabia’s energy minister, Khalid al-Falih, said that the oil market is balancing out and any “significant intervention” isn’t required. This suggests that Saudi Arabia may not make a major contribution at the oil producers’ meeting.

Read Crude Oil Producers’ Meeting: Is It Smoke without Fire? for more analysis. You can also read OPEC’s Crude Oil Production Rose, Bearish for the Oil Market, Decoding OPEC Members’ Crude Production in July 2016, and Russia’s High Crude Oil Production Is Negative for Crude Oil Prices. 

Impact on stocks and ETFs

The volatility in crude oil prices impacts the profitability of oil and gas producers such as WPX Energy (WPX), QEP Resources (QEP), Synergy Resources (SYRG), and Goodrich Petroleum (GDP).

It also impacts funds such as the Vanguard Energy ETF (VDE), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Direxion Daily Energy Bear 3x (ERY), and the Guggenheim S&P 500 Equal Weight Energy ETF (RYE).

In the next part of the series, we’ll look at Cushing crude oil inventories.

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