18 Oct

Market Moves Focus to OPEC Meeting in November

WRITTEN BY Gordon Kristopher

Major oil producers’ meeting 

Crude oil prices rose 12% in August 2016, partially due to speculation around OPEC’s attempts to cap output. US crude oil rose 10.5% in September 2016, partly due to the announcement of a reduction in crude oil production by up to 700,000 barrels per day by OPEC members after their Algeria meeting. For more information, read Crude Oil Prices and Oil Producers’ Meeting in Istanbul and Decoding the Major Oil Producers’ Meeting in Algeria.

So far, US crude oil has risen 5% in October 2016. For more about crude oil prices, read part one and part three of this series. Many traders believe that the oil market has priced in the impact of the oil producers’ production cap announcement in Algeria.

Market Moves Focus to OPEC Meeting in November

OPEC meeting in November 2016

An OPEC meeting is scheduled on November 30, 2016, in Vienna. On October 17, 2016, Kuwait’s oil minister said that he was positive about a deal at the November OPEC meeting. Similarly, on October 10, 2016, Saudi Arabia’s energy minister said he was optimistic about a deal at this meeting. This meeting would provide details of the quota system for OPEC members. However, difficulty in monitoring OPEC and Russian crude oil production will be a key challenge.

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 the meetings. 

Impact on oil producers 

If OPEC and Russia reduce crude oil production in the coming months, it could push crude oil prices higher. Read Iran, Nigeria, and Libya Could Undo OPEC’s Historic DealWill 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 

Uncertainty around OPEC meetings has increased the volatility in the crude oil market. The ups and downs in crude oil prices can impact the profitability of oil and gas producers like Comstock Resources (CRK), Synergy Resources (SYRG), 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 iShares U.S. Oil Equipment & Services ETF (IEZ), the DB Crude Oil Double Short ETN (DTO), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), 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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