There has been a massive chaos created by the leading Organization of the Petroleum Exporting Countries due to the lack of planned oil production in the recent days. These have created strong fear into the mind of investors regarding the next move of the oil price. Last Friday oil futures has broken the six-week low which is nearly 10% drop in the price until January 2016.The upcoming FOMC meeting minute has also created massive frustration among the investors since FED has not clearly stated anything about their rate hike decision in the month of December. However leading economic researchers to suggest that there is a 67.3% possibility of a rate hike in the month of December which might act as the key ingredient to bringing stability in the oil price. After the recent threat given by Saudi Arabia to Iran, to cap their oil production, the market reacted violently. Since Saudi Arabia stated that they are most likely to increase their oil production in the upcoming days in reference to Iran’s oil production issue, investors sentiment turned strongly bearish with that statement. However, after a short period of time General Mohammed Barkindo, Secretary of OPEC announced that their statement was not an indication of threat rather its proposal for planned oil production. Followed by the statement the oil price found some support in its sharp bearish move. According to the senior market analyst, Phil Flynn of Price Future Group clearly stated that there is a strong possibly of oil production war among the leading organization if things don’t settle quickly in a planned way.
There has been a strong fall in the West Texas Intermediate crude oil which is near about 59 cents or 1.3%.After this sharp fall, the price of per barrel settled t $44.07 on the New York Mercantile Exchange just after hitting a low of $43.57.According to the fact Set data, the largest weekly drop in the Futures also occurred on the last Friday which accumulated a loss of 9.5%, the largest drop till the mid of January 2016. LCOF7,Brent Crude oil dropped by 77 cents or 1.7% which lead the price of per barrel $45.58 even though this price was based on the most-active contracts which were also down by 8% in the week, lowest till the month of September. The oil market is suffering from lots of uncertainty about its future production and investors are fear about the specific limits of to the output of oil production. Due to the news variation in OPEC, it clearly indicates the massive disagreement among different oil production organization regarding the capping of its output. According to Evans, this is highly unlikely to get any commitment from the non-OPEC members until the OPEC members settle down with a single opinion. However, this is not possible until all the responsible parties sit together and arrange a meeting to discuss this matter for the final settlement. In the last September, the OPEC members stated that they are most likely to follow a simple policy to cap the oil production 32.5 to 33 billion per day to bring stability in the market. However, the significance of this suggested production can’t be evaluated till the next OPEC meeting which will be on 30th November 2016.
Russia was playing an important role to bring stability in the oil production in the recent days. But investors are losing hopes since the recent meeting between the Russian oil production officials counterparts the OPEC suggested capping policy. The sharp rise in the OPEC production and Russian production which strongly contradicts the ongoing effort to bring stability. In order to bring stability and limit the oil production both the parties need to act in a planned way. In the month of October, OPEC production exceeded 34.02 million barrel per day which is a dramatic increase in the oil production world. Cording to the recent Bloomberg News survey Libya, Nigeria and Iran produced more than 400,000 barrel per day which resulted in the exponential growth in oil production. According to Richey, the energy market is most likely to remain highly sensitive but the overall scenario still remains strongly bearish on the provided circumstances. However, investors are going to strongly focus on U.S oil production unless the leading global oil producers come to a certain agreement to limit the production of the oil. The market sentiment will turn strongly bearish if the oil production in the 48 states holds at 8 million or more barrel per day.TO be precise the oil market will be highly sensitive to U.S news release in the upcoming weeks and conservative investors are going to stay on the sideline until the market shows some stability.
There has been an increase of 14.4 million barrels in U.S crude stock according to the Energy Information Administration which is the largest weekly rise on EIA records till 1982.On last Friday data from Baker Hughes showed that the number of active U.S oil rigs rose by 9 to 450 rigs in the weekly time frame. This dramatic increase in the oil rig has been accomplished over the period of last 10 weeks. The price of gasoline fell by 4.6 cents or 3.2% to $1.379 a gallon which ended the week lower with a loss of 5.2%.On the contrary the HOZ6, -1.58% fell by 2.8 cents or 19% to $1.430 a gallon which caused a loss of 8.2% in the last week. However, there has been a decent rally in Futures prices for gasoline on last Tuesday which accumulated a gain of 4.6%.The price of Natural gas,NGZ16,+0.43% settled at $2.767 per million British thermal unit which is 0.1% down for the session. Despite such massive fluctuation in energy production investors are cautiously waiting for the December FOMC meeting minutes which might bring stability in the oil industry.