When in doubt, punt! Sometimes cutting seems to be the hardest word. OPEC bows to global economic pressure and the Kingdom of Saudi Arabia. The cartel, in the face of a growing global economic slowdown, opted not to cut production at their meeting yesterday. Instead the focus was on OPEC's compliance to the previous 4 million barrels or so of cuts. In fact compliance to current cuts is running close to 85%, a record for the notorious cheaters. So I guess the solution to OPEC and all their problems is to get compliance near 87%.
As I wrote last week OPEC members were counting on Saudi Arabia to save them from themselves. The talk of 85% compliance to their cuts seemed less impressive when you remember that it is the Saudi's were the ones doing the biggest percentage of the cut. OPEC members compliance was good but only because the demand for their product wasn't that great in the first place. The EIA expects that OPEC's oil export revenues will fall by a whopping 61% this year. That kind of income drop is causing stress and it is clear that if OPEC was going to cut back on production it was not going to be the Saudis that were doing the cutting. Oh sure the cartel said they were not cutting because they were concerned about the global economy. But the real reason is that the Saudis decided that enough was enough.
OPEC got the full court press from the Obama administration. And Reuter's news wanted to give them credit. Reuters said that, Two days after U.S. President Barack Obama called Saudi King Abdullah, OPEC said it would stick to existing supply targets, even though fuel inventories have swollen and oil prices are much lower than it would like. They said, it also gave a tentative welcome to the new U.S. administration. I don't want to say that I voted for Obama, but we can see a different tone ... that we didn't see in the past, OPEC Secretary General Abdullah al-Badri told reporters.We have seen a positive approach. They are ready for dialogue and we are ready for dialogue and ready for talk.
Now if anyone believes that the reason OPEC did not cut production is because of the Obama administration they are not paying attention. The reason is because the Saudis were tired of carrying the load and the dollar firmed up. The OPEC Secretary General was calling for cut just days ago. It was not the Obama administration but the Saudis that gave him a new tone, the kind of tone that says that the Saudis rule the roost in the OPEC cartel. He may be Secretary General but if OPEC is going to be a force it is the Saudis that call the shots. Cut my backside.
Reuters also said that U.S. Energy Secretary and OPEC is not my domain Steven Chu said he was pleased with OPEC's latest output decision, although he restated the U.S. commitment to ending its talk dependence on foreign oil. The Saudis love that kind talk. I am sure Mr. Chu knows how to win friends and influence people.
We're short April crude from apprx 4570 - stop 5100.
Sell April heating oil at 12700 - stop 13300.
Sell April RBOB at 13500 - 14300.
We're short April natural gas from apprx 437 - lower stop to 411!
The Dan Flynn Corn Ethanol Report
Good Morning !
The May Corn settled at 390 putting it up 1 1/2.
The range was 390 381 1/2.
The Corn most probably trade rangebound until the March 31st report of Grain Stocks and Prospective Plantings.
Energies are getting crushed in early trade.
Opec and Russia are doing their best to create higher prices.
I still remain bearish on this front.
Have a Great Trading Day !