Crude Opens 2019 on a Positive Note

[OilPro_Rolando + 17]

Oil prices climbed a bit on the opening day of  2019. Bloomberg, as reported by Myra Seafong, in MarketWatch, is reporting a drop in Saudi shipments in December. The drop is being portrayed as an early indication of implementation of cuts promised by Saudi.  It could also signal a drop in Demand as reports coming out of China show a slowing economy, but nobody wants to hear that noise. Saefong also quotes Phil Flynn, senior market analyst at Price Futures Group, as saying that Saudi will definitely implement production cuts. You could read it either way.  Certainly, lower prices do no good for Saudi. Without help from Permian producers, smaller OPEC producers, or any signs of growth in the Global economy, they have little choice but to bear the brunt of managing global supplies. The problem is that there is growing evidence that Saudi's internal finances continue to deteriorate.  This has been exacerbated in no small way by the ongoing fallout from the murder of Kashoggi.  So, it may be that Saudi will simply have to sell oil at any price if for no other reason that to generate cash flow.  

Saudi does have a history of thinking and acting strategically.  This is not to say their strategy is always good. Witness their ill fated "War on Shale" that has horribly backfired and placed them in this predicament.  So, it wouldn't surprise me if they continue to give off signals of actually implementing cuts during the first half if not all of January only to snap back as soon as a rally is sparked.  They have a real opportunity to have it both ways. If the fall in shipments is actually due to softening demand, we won't know it until much later in the quarter. So they can play them as the promised cut and at least place a soft floor under prices for the short-term.  Traders will be all too happy to play along.  

  https://www.marketwatch.com/story/oil-prices-pull-back-to-kick-off-trading-in-the-new-year-2019-01-02

Edited January 2, 2019 by OilPro_Rolando
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