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FiringSquad13

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Oil Surges After Saudi Arabia Pulls A Draghi, Says Will Do "Whatever It Takes" For Stable Oil Market

 

http://www.zerohedge.com/node/516900

 

The oil producers are rapidly learning from the central banks how to jawbone markets higher. With both Brent and WTI sliding as recently as ten minutes ago, suddenly a buying frenzy was unleashed following a Bloomberg headline which cited the Saudi Press Agency, according to which the world's largest crude exporter was ready to pull a Draghi and would do "whatever it takes" for a stable oil market, and that it would cooperate with OPEC and non-OPEC members for stable prices.

Here is the Bloomberg take:

  • SAUDI GOVT READY TO DO WHAT IT TAKES FOR STABLE OIL MARKET: SPA
  • SAUDI READY TO COOPERATE WITH OPEC, NON-OPEC FOR STABLE PRICES

Which however is somewhat different from the actual SPA press release, which says "The Cabinet stressed the Kingdom's role in the stability of the oil market, its constant readiness and continuing pursuit to cooperate with all oil producing and exporting countries."

Whether this means that Saudi Arabia, which has been pumping record amounts in recent months will slow down, is unclear: after all the entire strategy by the Saudis has been to put marginal, high cost producers out of business. So did they just wave the white flag of surrender? We seriously doubt it.

If anything, this is more of a market test to see just how much impact jawboning has on market prices. And judging by the immediate reaction, it is substantial.

  • BRENT CRUDE PARES LOSS TO TRADE 18 CENTS LOWER AT $44.48/BBL
  • S&P FUTURES PARE DROP TO 2.5PTS AS OIL PARES LOSS; NASDAQ -4PTS

Draghi would be proud.

Of course, whether the Saudis will actually do anything, well that's a different story.

 

Brent.png

 

 

US crude.png 

 

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Didn't last too long?  Or am I seeing something else.  Anyway - an interesting idea I read today - the Saudis may have to un-peg their currency.  Rather than try and fiddle oil output.  I was only reading superficially, and haven't thought too much about it.  Could be a black-swan to watch out for ?  OR?

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Yes you are right, it soon came back down.  I read that also.  The Saudis are under pressure but really dont want to cut production and lose market share.  It had been suggested that they un-peg.  Currency futures are pricing this in.  I think we will find out soon enough when OPEC meet early December.

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I agree with what you're saying , and like that you're watching this and letting us know.  BUT - (in general) I find it funny that everything is always priced in, but the price of the commodity (in this case oil) will still move strongly when some news comes out as if nothing has been priced in. 

Do you really think people have priced in the impact of a Saudi un-peg? 

Just like everyone has priced in a US rate hike, but the markets have rallied to a higher point that when this re-pricing occurred?  I am not arguing one way or the other, the market is always "right" so to speak.  YET I wonder a little about what's been priced in or not. 

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I get your point about the term "priced in".  Will be interesting to see exactly how markets respond to upcoming events.  For example some argue that the dollar is pricing in the first few rate rises.  Although I think there will still be big currency moves when it does happen.  Rather than the dollar getting weaker, I think when other central banks move, their currency will gain stregnth against the USD and this is when things will start to balance again.

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