By Barani Krishnan
Investing.com - Is Round 2 of a dead-cat bounce in play? Or has Saudi Arabia and OPEC found a way out of the “Trump fix” they’re in?
Will the Khashoggi murder, hanging like an albatross around Saudi necks, allow them to play mind games with the president or invite his wrath and U.S. sanctions later?
Crude was up more than 2% on Monday after Friday’s 8% rout after Goldman Sachs said current prices were an “extremely attractive entry point for longs in oil” and other commodities.
U.S. WTI settled up $1.21, or 2.4%, at $51.63 a barrel.after rallying as much 3.6% earlier to $51.74. On Friday, WTI settled down almost 8%, hitting a 13-month low of $50.16. It had rebounded 2% earlier that week, again on dubious reasons.
U.K. Brent, the global benchmark for oil, was up $1.52, or 2.6%, at $60.56 per barrel by 2:42 PM ET (19:42 GMT). It fell more than 5% on Friday, shattering the $60 support that had been its perch since July 2017, after a rebound earlier in the week.
Notwithstanding the Goldman report, the oversupply concerns that shattered Brent’s $60 support last week (and almost cracked the $50 lifeline that West Texas Intermediate just managed to cling to) remain.
Saudi Arabia’s oil production hit an all-time high of 11.1 million to 11.3 million barrels per day (bpd) in November, Reuters quoted an industry source as saying. The exact output averaged for the month will only be known when November is over, it said.
President Donald Trump, meanwhile, didn't let up on the pressure he was piling on the kingdom to refrain from production cuts at the Dec. 6 OPEC meeting, with the latest act being a self-congratulatory tweet on Sunday that read: "So great that oil prices are falling (thank you President T)."
Trump is seen as having major leverage over any Saudi production cut plans after Riyadh admitted to the premeditated murder of journalist Jamal Khashoggi without fingering its Crown Prince Mohamad bin Salman. Many analysts think the president is the only hope for the Saudis to avoid facing major and embarrassing U.S. sanctions for the murder and Trump has backed Riyadh so far.
Dow Jones reported that Saudi Arabia and OPEC may have found a way out of the fix by planning to announce an extension of current cuts and quotas from 2016 into 2019, then working to “over comply” to erase out the glut in supply. The group hopes that such "clandestine" cuts will keep president from tweeting that there should be no reduction in supplies.
"It will be still a big cut but less pronounced," a senior Saudi oil advisor told Dow Jones. OPEC had floated a 1.4 million bpd cut before Trump started pushing back.
Bloomberg added that the Nov. 30 G20 meeting in Argentina may be where the actual amount of a production cut will be decided. Saudi Energy Minister Khalid Al-Falih and his Russian counterpart Alexander Novak will be in Buenos Aires together, reinforcing the impression they will try to reach a deal ahead of the OPEC meeting. It wouldn’t be the first time the two energy superpowers used a G20 to decide on oil policy.
But even some oil bulls said the market may not react favorably to such clandestine maneuvers.
“If OPEC keeps it a secret, the market may punish them because it will appear that they don’t have the will to cut back,” said Phil Flynn, analyst at Price Futures Group in Chicago.