The main reason for oil's torrid surge over the past 2 days is that following yesterday's Russia-Opec "oil production cut" headline fiasco, crude traders - who as we previously reported already had a record net short position - scrambled to cover their exposure on the assumption that where there is oily smoke, there will be fire.
It is safe to say that nobody expected the BOJ stunner announced last night, when Kuroda announced that Japan would become the latest country to unleash negative interest rates, for one simple reason: Kuroda himself said Japan would not adopt negative rates just one week ago! However, a few BIS conference calls since then clearly changed the Japanese central banker's mind and as we wrote, and as those who are just waking up are shocked to learn, negative rates are now a reality in Japan.
Headline hockey continues in the energy complex as earlier confirmation of a pending OPEC meeting possible in February has seen more color added, via Reuters, that Saudi Arabia made a proposal that OPEC members cut production by a maximum of 5%. There remains confusion however as Bloomberg reports simply that Russian energy minister has said they "may discuss it," as opposed to being a specific proposal.
Reuters seems confident that The House of Saud has backed down and prosposed the cut...
Submitted by Allen Gilmer via OilPrice.com,
The one given in this industry is that the analyst community is consistently wrong about where the price of oil is going in the near to mid-term. Just as $100 oil was a sentiment driven price that baked in the risk of every potential negative impact on the supply chain, $28, $30 or $40 dollars is equally sentimental, assuming that any and all incremental barrels are and will be available AND demand will slow or stop.
2013 and 2015 forecasts. (forecasting sentiment is hard) Image Sources: EIA
Submitted by Tom Kool via OilPrice.com,
Iraq has been one of the key contributors to the uptick in OPEC oil production over the past year and a half. Despite the fact that the country’s crude oil output has continuously been plagued by security concerns and faltering payments to international oil companies from both the Kurdish regional government (KRG) and Baghdad and an ongoing row over oil export rights, it has still managed to ramp up production to record levels.