OPEC: when meeting expectations are simply not enough

The idea of targeting the five-year average in inventories is still the goal, but some had been hoping that if they genuinely were keen to “do whatever it takes” then we could have seen a 12-month extension or even deeper production cuts. Including Nigeria and Libya in the production caps to make the agreement truly universal would have also been a positive measure, but similar to the November agreement, they are free to increase quotas.

That would have taken some negotiations and leadership from the Saudis to rally the troops to allow those two sovereigns to be excluded.

The fact the Saudi energy minister seemed so unfazed by the selling, detailing that he doesn’t worry about daily market kneejerk reactions, was also a key signal for those involved in the recent rally to cut back on their bullish exposure.

Mr Al-Falih did push the idea that OPEC is open to extending the cuts for a further nine months, which is supportive of oil, and would almost certainly go a long way to assisting a longer-term balanced oil market.

While we may see headlines and rhetoric from oil ministers in the weeks ahead, specifically if oil prices do head into the low $40, then we probably won’t hear any concrete news until the next scheduled OPEC meeting on 30 November.

The question, of course, is whether this position adjustment represents a buying opportunity or whether price can break $48.35. My preference is to buy this pullback here, with a stop below $48.35, but it is a risky trade and position sizing would be kept to a minimum.