If OPEC reduces output to 32.5 million barrels a day -- a cut of 900,000 a day from September levels -- it would be pumping slightly less than the amount needed to meet demand in 2017, the group’s monthly report from Oct. 12 shows. Inventories would contract as a result, but only by 36.5 million barrels over the course of the year, a negligible impact on a stockpile surplus the group estimated at 322 million barrels above the five-year average in August.

If OPEC doesn’t act to reduce stockpiles next year, Societe Generale’s price forecasts would probably have to be revised lower, Mike Wittner, head of oil-market research, said in an e-mailed note. Over the first three quarters of 2017, the bank currently sees Brent averaging $55 a barrel and West Texas Intermediate at $53.50.

 

Eoin Treacy's view

If oil prices are to be massaged higher Saudi Arabia and Russia will have to come to an agreement to curtail supply and by more than has already been agreed. Such an agreement would require major sacrifices on both their counts since Saudi Arabia is engaged in a rationalisation of generous handouts its citizens have been accustomed to for decades. Meanwhile Russia is actively engaged militarily in both Ukraine and Syria as well as having expensive plans to revitalise its nuclear arsenal. These decisions would also have to be taken in the knowledge that any additional rally in oil prices will encourage even more US unconventional supply back into the market. 

Brent Crude has paused in the region of the upper side of its four-month range and firmed today from the psychological $50 area. By virtue of simply pausing for much of the month it has unwound the short-term overbought condition and is in fact oversold at the current level; suggesting some scope for a bounce. The fact prices have been inert since September exaggerates the moves in short-term stochastics so it is possible that prices could rally in a swifter manner than the market has become accustomed to if news flow can act as a catalyst. 

The Saudi Arabia Tadawul Index has bounced from the region of tis January low and a mean reversion rally is looking more likely than not. 

The Russian Traded Index has broken a more than four-year downtrend and recovery potential can be given the benefit of the doubt provided it is trading above the 200-day MA

The Norwegian OBX Index broke out to new 12-month highs on Tuesday and rallied today to countermand most of yesterday’s drawdown. A sustained move below 560 would be required to question potential for additional higher to lateral ranging. 


The FTSE-350 Oil & Gas Index has been lent a significant tailwind by two significant declines in the Pound. Meanwhile the S&P 500 Oil and Gas Explorers and Producers Index has been ranging with a mild upward bias since May and bounced today from the region of the trend mean.