Major oil producers’ meeting
On October 10, 2016, Russian President Vladimir Putin said that Russia would join OPEC (Organization of the Petroleum Exporting Countries) in discussing caps on crude oil production at an energy forum in Istanbul. The meeting will be held between OPEC and major oil producers from October 8–13, 2016. In September, OPEC producers reportedly reached an agreement to discuss details of production caps in the November meeting. For more read, Decoding the Major Oil Producers’ Meeting in Algeria.
Crude oil prices rose 12% in August 2016—partially due to speculation about the outcome of this meeting. US crude oil rose 10.5% in September 2016—partly due to the announcement of a reduction in crude oil production between 700,000 barrels per day and 1 million barrels per day by OPEC members.
So far, US crude oil rose 7.4% in October 2016. For more crude oil prices read Part 1 and Part 3 of this series.
On October 10, 2016, Saudi Arabia’s energy minister said he was optimistic about a deal in OPEC’s November meeting in Vienna. OPEC didn’t cap its production at its meeting on June 2, 2016. The failure of the Doha meeting on April 17, 2016, also put a lid on crude oil prices. Read Hopes for Oil Producer Meeting Boosted Prices for Last 2 Months and Why Did the Doha Oil Producer Meeting Fail? to learn more.
Read How Did Crude Oil Prices React to the Last 3 OPEC Meetings? for more on OPEC’s meetings.
Impact on oil producers
If OPEC and Russia reduce crude oil production in the coming months, it could push crude oil prices higher. For more crude oil prices forecasts, read the last part of this series.
Read Iran, Nigeria, and Libya Could Undo OPEC’s Historic Deal, Will Saudi Arabia’s Crude Oil Production Strategy Work?, Iran’s Crude Oil Production Could Impact the Crude Oil Market, and What Will Happen if the Oil Producer Meeting Succeeds? to learn more.
Impact on oil stocks and ETFs
Speculation about oil producers’ meeting increased the volatility in the crude oil market. The rollercoaster ride in crude oil prices impacts oil and gas producers’ profitability such as Synergy Resources (SYRG), WPX Energy (WPX), Range Resources (RRC), and Goodrich Petroleum (GDP).
Volatility also impacts funds such as the Vanguard Energy ETF (VDE), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the DB Crude Oil Double Short ETN (DTO), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Fidelity MSCI Energy (FENY), 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.
Baker Hughes reported that the US crude oil rig count rose by three to 428 rigs between September 30 and October 7, 2016.
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