Almost nothing that happens in the global oil markets is unprecedented. The latest development that comes close was the agreement between the Organization of the Petroleum Exporting Countries (OPEC) and Russia to cooperate on production quotas in the hope of lifting the price of crude.
What happened over the past weekend could have been a diary entry written by an OPEC minister in any other year when the price of crude jumped.
On September 25, 2007, benchmark Brent crude oil rose above $80 a barrel for the first time ever. By the following December, the price had fallen by more than half. Brent crude for November delivery rose to more than $81 Monday, the first time it has reached that level since Brent was falling from a high of near $100 in September of 2014. The last time Brent crossed the $80 barrier on its way up was in September 2010.
Today’s increase in crude oil prices follows an announcement Sunday following a meeting of OPEC and non-OPEC oil ministers that the cartel and its partners were not going to respond favorably to President Trump’s demand for lower oil prices. The assembled ministers agreed that the market is currently balanced and they said they are prepared to increase production if the need arises.
When do they think the need will arise? Reuters energy market analyst John Kemp has provided a handy checklist as a guide to OPEC strategy:
SEVEN STAGES of OPEC – a quick cut-out-and-keep guide:
1) Despair (low prices forever?)
2) Cautious hope (prices start to rise)
3) Boom (prices and revenues surge)
4) Denial (rising prices not our fault)
5) Acceptance (we can and will boost output)
6) Concern (volatility is unhealthy)
7) Regret (uh oh …)
Repeat
We are currently at stage 4 according to Kemp. Our instincts say that denial is just around the corner and, perhaps as soon as December, we’ll have reached stage 6.
Brent crude for November delivery closed at $78.80 on Friday and traded at $81.09 in the noon hour on Monday, up 2.9%, after rising as high as $81.39.
West Texas Intermediate (WTI) crude for November delivery closed at $70.78 on Friday and traded at $72.36, up 2.2% after falling back from an intraday high of $72.74.
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