Oil macro analysis, page-25

Just a few points -

1) Saudi calming the market at critical level

I mentioned yesterday that for me WTI 40 is a very critical level. I cannot help but notice that Saudi came up with market calming statements yesterday itself. It could possibly be that they too realize that oil is at a critical level.

Keep in mind that Saudi has massive power to influence the market but might want low prices to persist. At the same time, they wouldn’t want it too low where they too are very adversely affected, and have serious budget problems.
Refer point 15 of my August macro analysis where I explained Saudi's position in detail
http://hotcopper.com.au/threads/oil-macro-analysis-pros-and-cons.2582725/?post_id=15890294

2) Moving with the energy sector

Solid correlation with XEJ as can be seen from @Wealth888 ‘ s chart (quoted comment - thanks @Wealth888). As I mentioned yesterday, IMO, LNG mainly seems to be tracking the oil sector.
Here is more info on XEJ. I’ve mentioned the movements of many of those individual stocks in past few months in my yesterday's comment
http://www.smh.com.au/business/markets/indices/share-listing/XEJ/sandpasx-200-energy-sector

3) Global oil glut and not so convinced market
I mentioned in point 13 of my August macro analysis of how Iran could lead to an additional oil glut, and in point 19 of the current global oil glut as the world is drowning in oil. As I mentioned there, the oil glut was still likely to continue. The market too was not so convinced yesterday, and oil has swung wildly as both bulls are bears are taking their best bets.

Here is an article which discusses the same, with key excerpts –
“The Saudi statement came as oil held barely above 2-1/2-month lows, and was greeted with a mix of enthusiasm and scepticism. Despite similar pledges before, the Saudis and other big OPEC producers have kept output high to maintain market share, and crude prices have halved over the past year. OPEC's next meeting on production targets is on December 4.”
http://www.copyright link/business/...di-pledge-global-glut-worries-20151123-gl66hc

And another article –
Excerpt - “This could be just empty promises. If the market really believes the Saudi are ready to support prices, prices would be rebounding lot higher,” said Daniel Ang, an energy analyst at Phillip Futures.”
http://www.wsj.com/articles/oil-prices-rebound-focus-on-opec-meeting-and-u-s-data-1448329038

4) OPEC meeting

I mentioned again in point 13 of my analysis as to how the OPEC meeting will be in Vienna on December 4 and how this could possibly mean uncertainty and low prices all the way till December. This does seem to have happened as the market seemed unable to make any solid bullish decisions over the past few months.

IMO, the soon to come December meeting could be extremely important to give further direction to the market. If Saudi cuts output, then oil and energy stocks could well have a sharp rise.
If Saudi keeps giving hopes to the market like yesterday, then reaction could be similar to today.
If Saudi does nothing, then there could well be a sharp fall or even a bloodbath. Keep in mind that year end tax loss selling by US instos in particular could be bad for energy stocks in December, in that scenario, with a potential rise in January.

5) Other members of OPEC
I mentioned in point 20 of my Aug analysis that some OPEC countries like Algeria, Iraq, Libya, Nigeria, and Venezuela are among the countries that are being very badly hit by falling oil prices, and this could be positive for oil as they revolt against Saudi in the OPEC meeting.
As @Stocks78 has pointed out earlier in this thread, Venezuela has openly said that they don’t agree with Saudi’s position
http://hotcopper.com.au/threads/oil-macro-analysis.2582727/page-5?post_id=16460271

Another recent article also talks of dissent from Venezuela, Algeria and Iran, like I mentioned in August. So, it is definitely going to be a volatile meeting.
http://www.smh.com.au/business/mark...-as-vienna-meeting-looms-20151124-gl6bte.html

6) Today’s LNG movement

LNG indeed rose with oil’s rise and when I checked my energy stocks list, LNG was number 1 on the list with the biggest rise, for sometime today morning. Like I said yesterday, I thought it would simply track oil, and seems one of the most sensitive to oil price movements of all the ASX energy stocks

Unfortunately for LNG, the market itself seemed skeptical of oil’s rise like I mentioned earlier. LNG ended flat but that was not too bad. Just a quick look (please cross check) and it seems the only energy stock on my list (and of all that I mentioned yesterday) that ended higher was STO with a small 0.75% gain, with almost all the other oil stocks down. LNG and OSH ended flat.
So, today’s movement was not all that bad guys- cheer up. Note however that LNG is still very much tracking the broader oil market – So further oil rises / falls will in all likelihood continue having a similar effect.

7) Conclusion

Oil is a deeply political commodity and almost impossible to predict with certainty. I’ve tried to cover as many pros and cons as possible. I mentioned the 4 main players in my August analysis – Saudi, US, Russia and Iran. Having some basic understanding of the 4 main players and the political dynamics is crucial to get a basic understanding of oil, and even the best understanding might not be sufficient as politics is ever changing. These 4 countries IMO will continue to influence the price of oil.

I’ve just covered a few points above which I thought influenced today’s LNG movement. I’ve covered many other pros and cons in my Aug 27 and Oct 27 analysis linked yesterday. There are so many besides the few that I just mentioned right now that I can’t say which will influence in short term. WTI does seem to be picking up right now and is USD 42.43 as I type.

Very key moments for oil in the form of 40 WTI support and the December 4 OPEC meeting are at our doorstep. Understandably the market is tense. These 2 points continue to be very important short term catalysts IMO.

Good luck with whatever decisions people take, and hope things work out for you guys.
Cheers