The OPEC Oil Boys Who Cried Wolf

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Oil prices came off lows reached last week on reports of another OPEC oil minister’s comments. It’s a story we have heard before over recent weeks, with implication of a potential emergency meeting of OPEC and non-OPEC energy producers to coordinate a production cut. In fact, Russia met with Saudi Arabian representatives this week and agreed to freeze oil production. Events like these led me to coin the term, The OPEC Put, which implies there is a floor for oil prices at the breakpoint where OPEC will act to cut production. However, I have also noted the impact of rhetoric alone on oil prices, and the likelihood of some producers to talk up prices in this manner. However, like in Aesop’s Fable, The Boy Who Cried Wolf, eventually the market will no longer respond to OPEC’s calls. When the OPEC boys crying wolf fail to prevent oil from collapsing on words and alone, I anticipate they will eventually actually have to act on production. I see that breakpoint at $25 or lower for crude. See the full report on The OPEC Boys Who Cried Wolf.

Energy Relative Shares	02-16-16
SPDR S&P 500 (NYSE: SPY)	+1.7%
United States Oil (NYSE: USO)	-0.2%
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