“There’s going to be a cut, I think it’s going to be more than people expected, and I think the market realized that today,” said Bob Iaccino, chief market strategist at Chicago-based Path Trading Partners.
For a time, oil pared gains on Monday after an OPEC advisory panel was said to make no recommendation for action and people familiar with negotiations said Russia and the Saudis still haven’t agreed on details of a cut. Iranian OPEC Governor Hossein Kazempour Ardebili, meanwhile, raised doubts about whether producers can reach unanimity in Vienna.
The big news from the oil market has been the decision by Alberta to reduce supply by 385000 barrels a day. That’s a direct response to the plummet in Western Canada Select from a peak near $60 to $13 last week. This also highlights how it is marginal suppliers reliant on high prices for profitability are most at stress in the evolving secular bear market.
With the prospect of a Russia/OPEC cut on the horizon Brent crude rallied more than at any time in the course of the short-term downtrend to confirm a short-term low. That increases scope for a reversionary rally but even the bullish prognostication would require a period of support building before a move to substantially higher levels is likely to be sustained.