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There has been a lot of attention paid to OPEC lately as oil prices have sold off so sharply over the last couple of months. Many analysts have been wondering if the 11 nation group would call an emergency meeting to discuss the possibility of cutting production ahead of their next regularly scheduled December session. Last week both Nigeria and Venezuela announced they would cut back on their production which left us wondering whether this was a desperate attempt on their behalf, or possibly a sign of more to come.After last week's cuts from Nigeria and Venezuela, I stated my view that the only way any cuts would be able to have a substantial effect on the price of the precious crude would be if we started to see pullbacks from some of the larger OPEC nations. Well, today we have the first sign of such production cuts as OPEC now plans to cut back 1 million barrels a day. Of this, 300,000 barrels are being reduced from Saudi Arabia. An OPEC governor stated that these cuts would be made effective as soon as possible.
So far OPEC has not made any concrete plans to meet to discuss any further cuts. But should today's actions not have the desired result of stabilizing prices, don't be surprised if the group doesn't move quickly in the weeks ahead. It is apparent that OPEC has said enough is enough and will now start to do whatever they have to in order to protect oil's price.
The chart below gives you an indication of just how steep oil's sell off has been over recent months:
Today the market has rallied on the news and oil has traded up $1.34 to $60.75 after hitting a high on the day of $60.97.
Let's check out how oil stocks are doing on Wall Street:
- Sunoco Inc. (NYSE: SUN): +0.9% to $61.06 up $0.58
- Valero Energy (NYSE: VLO): +1.0% to $50.60 up $0.50
- ExxonMobil (NYSE: XOM): +1.0% to $67.30 up $0.69
- Chevron Corp (NYSE: CVX): +0.5% to $64.02 up $0.32
- BP p.l.s. ADR (NYSE: BP): -0.6% to $64.66 down $0.39
- Oil Service Holders Trust (AMEX: OIH): +1.9% to $124.95 up $2.35
Michael Fowlkes has worked as a stock trader for 7 years and spent the last 2 years working as an analyst and portfolio manager for an online investment advisory service.
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Reader Comments (Page 1 of 1)
10-05-2006 @ 12:35PM
Gary E. Sattler said...
Just what the doctor ordered.
Nigeria and Venezuela to cut production. What a sweet sounding tune. Maybe some of those Nigerian web and wire fraudsters will get the message that we're on to them.
Opec, 11 nations who think they rule the world. I scoff at them with gas nozzle in hand. Look at this you losers... I can fill my tank with sawdust now.
Those jokers ran a gambit on us this past summer. They found their ceiling and bounced off it hard. Cutting production won't help them anymore. We've called a new game. Every time they raise the price now, no matter how they do it. The money will just flow to the alternates. When they come back wining that they're sorry... we'll have already sliced another sliver off their market share. Yes, it's a share now.
In the business of organizational warfare, we call it a Catch22. "If you help me I win... If you try to stick it to me... I win also.
Memo to Osama:
I seem to recall a message wherein you stated that you were going to bankrupt America. We took that message to heart. "OOOOH I'm scared".
I hope your band of vagrants enjoys hotdogs (wink).
You're gonna be eating a lot of 'em.
Blessings to ALL, (except Osama, he's on his own)
Gary E. Sattler